Investment Advice, Normal Investment Experience

Certain common sense considerations relate to the criterion of normal or standard results mentioned above. Our basic thesis is this: If the investor is to rely chiefly on the advice of others in handling his funds, then either he must limit himself and his advisers strictly to standard, conservative, and even unimaginative forms of investment, or he must have an unusually intimate and favorable knowledge of the person who is going to direct his funds into other channels. But if the ordinary business or professional relationship exists between the investor and his advisers, he can be receptive to less conventional suggestions only to the extent that he himself has grown in knowledge and experience and has therefore become competent to pass independent judgment on the recommendations of others. He has then passed from the category of defensive or unenterprising investor into that of aggressive or enterprising investor.

Investment Counsel and Trust Services of Banks

The truly professional investment advisers-that is, the wellestablished investment counsel firms, who charge substantial annual fees-are quite modest in their promises and pretentions.

For the most part they place their clients’ funds in standard interest and dividend paying securities, and they rely mainly on normal investment experience for their overall results. In the typical case it is doubtful whether more than 10% of the total fund is ever invested in securities other than those of leading companies, plus 258 The Intelligent Investor

• The list of sources for investment advice remains as “miscellaneous” as it

was when Graham wrote. A survey of investors conducted in late 2002 for the Securities Industry Association, a Wall Street trade group, found that 17% of investors depended most heavily for investment advice on a spouse or friend; 2% on a banker; 16% on a broker; 10% on financial periodicals; and 24% on a financial planner. The only difference from Graham’s day is that 8% of investors now rely heavily on the Internet and 3% on financial television. (See www.sia.com.)government bonds (including state and municipal issues); nor do they make a serious effort to take advantage of swings in the general market.