2/7/2018 0 Comments Chapter 9In this chapter, Graham examines the methodology of choosing an investment fund. This chapter holds an incredible amount of importance today as people lose the time to actively manage their portfolios, and sets a foundation for what most investors should aim to provide for their customers.
First, Graham discusses the difference between open-end and closed-end funds. While the number of shares in open-end funds is constantly fluctuating because of clients buying and selling off shares, closed-end funds maintain a constant number of shares. Additionally, open-end funds are more likely to charge substantial fees for managing client's dollars. This creates a distinct disadvantage for the client, not only in the beginning when the fee is charged, but throughout their time with the fund. Closed-end funds, on the other hand, both cost less for the client and provide a higher ending return because of their lack of a commission. Graham also discusses "performance funds", which I feel like have risen in prominence in the modern day. These funds, typically managed by young and relatively inexperienced people, only aim to beat the market substantially using growth stocks. Growth stocks, however, are often extremely risky and speculative, which causes the incredible crashes that we have seen throughout history. In addition to speculation, these funds also carry with them the threat of fraud and counterfeit. Overall, individual investors seeking professional management for their portfolios should look toward small, closed-end funds that have a strong track record and have stopped taking in capital.
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Synopsis (Taken from Goodreads)The greatest investment advisor of the twentieth century, Benjamin Graham taught and inspired people worldwide. Graham's philosophy of "value investing" -- which shields investors from substantial error and teaches them to develop long-term strategies -- has made The Intelligent Investor the stock market bible ever since its original publication in 1949. ArchivesCategories |