Friday, September 5, 2008

Invested, in what?

I’ve just started John Bogle’s foreword of Benjamin Graham’s The Intelligent Investor, and already there is a part that has jumped out at me. John Bogle has been writing about the original book written in the 1940’s and some of the changes that have occurred since that time in the world of investing. This part caught my attention:

“Today, some 90 million Americans from all walks of life own shares of stock.
Even more astonishing, the lion’s share of those holdings is owned not directly
but indirectly through financial institutions- mutual funds, pension funds,
endowment funds, hedge funds, and the like…This institutionalization has left
the last-line investor in stocks a step removed from ownership, relying on his
managers to be faithful stewards….At the same time, as a trading mentality came
to dominate the market, a new rent-a-stock philosophy came to hold sway over the
former tried and true own-a-stock philosophy. Together, these two trends have
served to sharply dilute the role of the investor as a business owner.”

Here’s the crux of my issue: I don’t feel like a business owner.

I own a few individual stocks (that were aimed at teaching adolescent-me that Christmas gifts weren’t always fun and fuzzy), but the vast majority of my equities are in indexes. So technically, I’m a part-business owner of thousands of businesses.

While I am an investor that has a long time horizon and think frenzied day-trading is generally less fruitful than a lazy portfolio; I still don’t feel a connection to these stocks that I will probably own for 40+ years. I could call in and listen to the yearly owner’s meeting, yet I have no real sway. No ability to really affect policy, and no desire to do so.

I cognitively understand that a stock is a share of business that I am vested in. However, my heart has no connection to those businesses. I don’t care if, in the short run, these businesses cause my investments dip or rise, as long as they trend in an upward manner.

While I’ve read that you shouldn’t get too attached to your investments, is being detached good?

No comments: