Benjamin Graham's Advice For Young Investors

I’m in the process of re-reading The Intelligent Investor and found some words of wisdom from Ben Graham to young investors.  In his chapter entitled, “The Defensive Investor and Common Stocks” Graham states…

Let us not ignore human nature at this point.  Finance has a fascination for many bright young people with limited means. They would like to be both intelligent and enterprising in the placement of their savings, even though investment income is much less important to them than their salaries.  This attitude is all to the good.  There is a great advantage for the young capitalist to begin his financial education and experience early.  If he is going to operate as an aggressive investor he is certain to make some mistakes and to take some losses.  Youth can stand these disappointments and profit by them.  We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market.  Let him study security values and initially test out his judgement on price versus value with the smallest possible sums.

This is some great advice if you ask me.  I’m a big proponent of investing on your own, and think that everyone should always start out small. For my own investments I have a two pronged approach… For my retirement accounts, I follow Graham’s advice in that I don’t try to beat the market.  Instead, I use a portfolio of index funds that I rebalance whenever my asset allocation is out of whack.  This conservative route for my retirement accounts is then balanced out by my discretionary portfolio that is comprised mainly of individual dividend paying stocks.  I like this system because I know my retirement funds will never receive less than the market return and yet I can still try to outperform the market by picking my own stocks with my discretionary funds.