March 04, 2021
We've had a busy year in the markets with the crypto boom, Gamestop mania, and feverish S&P 500.
These astronomical gains have me wondering if Benjamin Graham's advice to stay in 75% stocks / 25% bonds holds true (adjusting the ratio in bear and bull markets). I think it does. As Warren Buffett's mentor, he cautioned against muddling investing and speculation.
In his seminal work, Graham wrote investing should either be defensive (index funds) or active (value stocks). The latter requires deep study and understanding of the business' fundamentals, balance sheet, and management. If you invest the time and have some degree of luck (or are Warren Buffett), you could beat the market in the long run (after taxes and fees). Otherwise, stick to dollar-cost averaging in index funds and get rich slowly. I use Wealthfront for my automated investing.
As for speculation (betting), keep it to no more than 10% of your overall portfolio, Graham writes. I keep my speculative bets in cryptocurrency (after a tumble in the options market). I believe decentralization and democratization of finance is inevitable. If you're interested in crypto, I recommend trading on Coinbase Pro and transferring your holdings to BlockFi, where you can earn outrageous interest, compounded daily (including 8.6% on a US dollar-equivalent).
I'm optimistic about the future and hope you are too!
Update 7/13/21: I've since moved my investments to M1 Finance, similar to Wealthfront but with no fees. I also dabbled in Fundrise, a crowdsourced real estate investment fund, but have since liquidated to buy a home.