tailieunhanh - The Intelligent Investor: The Definitive Book On Value part 5

The Intelligent Investor: The Definitive Book On Value part 5. The purpose of this book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little will be said here about the technique of analyzing securities; attention will be paid chiefly to investment principles and investors’ attitudes. We shall, however, provide a number of condensed comparisons of specific securities - chiefly in pairs appearing side by side in the New York Stock Exchange list in order to bring home in concrete fashion the important elements involved in specific choices of common stocks | 26 The Intelligent Investor of the fact that the interest and principal payments on good bonds are much better protected and therefore more certain than the dividends and price appreciation on stocks. Consequently we are forced to the conclusion that now toward the end of 1971 bond investment appears clearly preferable to stock investment. If we could be sure that this conclusion is right we would have to advise the defensive investor to put all his money in bonds and none in common stocks until the current yield relationship changes significantly in favor of stocks. But of course we cannot be certain that bonds will work out better than stocks from today s levels. The reader will immediately think of the inflation factor as a potent reason on the other side. In the next chapter we shall argue that our considerable experience with inflation in the United States during this century would not support the choice of stocks against bonds at present differentials in yield. But there is always the possibility though we consider it remote of an accelerating inflation which in one way or another would have to make stock equities preferable to bonds payable in a fixed amount of dollars. There is the alternative possibility which we also consider highly unlikely that American business will become so profitable without stepped-up inflation as to justify a large increase in common-stock values in the next few years. Finally there is the more familiar possibility that we shall witness another great speculative rise in the stock market without a real justification in the underlying values. Any of these reasons and perhaps others we haven t thought of might cause the investor to regret a 100 concentration on bonds even at their more favorable yield levels. Hence after this foreshortened discussion of the major considerations we once again enunciate the same basic compromise policy Since 1997 when Treasury Inflation-Protected Securities or TIPS were introduced stocks have no longer