Newsletter: What Benjamin Graham Can Teach Us About Investing when the World is Falling Apart

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Welcome to the FI Mastery Journey, a weekly newsletter where you receive actionable ideas from me to help tame financial chaos, get your financial house in order and live your legacy.

Here’s how it works: each week, you’ll receive one article written by me. You’ll also get three simple questions that go along with the week’s article to help jog your mind and inspire you to take small, bite-sized financial wellness actions.

And, you’ll also get an inside look at the research I’m reading.

Follow along for one year and you will have completed all the work necessary to keep your financial house in order.

My goal in all of this work?

To provide you with the tools, resources, and insights to help you take one step closer to becoming the master of your own financial independence journey.

This Week at a Glance

• Turn on the news or social, and there’s a lot to be worried about, right? That’s why this week we’re going back in time to learn from an renowned investor who lived through the events leading up to WW2, and how we can apply those lessons today.
• Fed Chair Jay Powell signaled that the central bank may be done with rate hikes during yesterday’s post-FOMC presser. If inflation continues to moderate and economic activity slows, history suggests that policymakers could start cutting rates in 6-12 months.
• ICYMI – last week we discussed the difference between “living” your legacy and “leaving” a legacy. This topic is worth a read (blog) or listen (podcast) if you’re interested in leaving your heirs with more than an pile of cash and no instruction manual.

Disciplined Investing when the World is Falling Apart

Lately, it feels like we’re staring into an abyss that makes even the most seasoned investors want to get out of the markets.

It feels like there’s a lot that’s going wrong with the world right now, and many things are quickly coming to a head.

That’s because, among many developments, the Middle East has once again become a flashpoint for geopolitical tensions.

Now, conflict in the Middle East is nothing new for the seasoned investor.

In fact, these uncertainties have largely become a typical part of the investing narrative for the past few decades.

But with that said, something FEELS different.

And now this change in sentiment comes as the US is at risk of being pulled into another regional conflict as it supports its close ally Israel.

Now, on any other day, this latest military ramp-up likely would be just another typical day in the region.

But things are different now than where they were over two decades ago.

That’s because the US is already fighting a proxy war with Russia in Ukraine, while the potential for a conflict with China in the Taiwan Strait increasingly feels less like a matter of “if” and more of “when.”

And why does this matter?

Well, such an outcome could potentially leave our country exposed to three simultaneous theaters of war at a time when trust in the media, trust in our politicians, and, most importantly, trust in our neighbors and our communities is plumbing all-time lows.

In many ways, it feels like we’re staring into the abyss of calamity that’s coming at us from all directions and society appears to be coming undone at the seams.

So then, what should an investor do at such a time of instability and uncertainty?

Should you move to the sidelines and wait until things settle down before risking more of your hard-earned wealth in this market?

Well, the simple answer here is a resounding “no.”

In fact, while things feel different, they also appear eerily familiar.

How to Be a Disciplined Investor

That’s why one of the greatest investing minds who lived through the Roaring 20’s, the Great Depression and World War 2, Benjamin Graham, likely would argue that now is the time to strap yourself in and focus on cultivating the mindset of a disciplined investor.

Here are some of his suggestions:

Step #1: Cultivate a Margin of Safety

During these times of uncertainty, it’s essential to prioritize maintaining a financial cushion to weather market and economic uncertainties. Graham advocated maintaining a margin of safety in investing, that can be applied to your finances as well.

Ask: How much liquidity do I need to free up in the coming months to fortify my financial situation against potential uncertainties?

By adopting a margin of safety in your finances, you ensure that you have a buffer against unexpected hardships, allowing you to weather economic storms with more resilience and peace of mind.

Step #2: Don’t Get Swayed by Mr. Market

Graham observed the manic-depressive nature of Mr. Market and advocated for staying consistent in your financial plan, regardless of external noise or pressures.

Ask: When uncertainties rise, am I making financial decisions based on research and understanding or am I being influenced by the erratic emotions of the market or financial media?

By not getting swayed by the daily fluctuations and days’ sentiments, you ensure that your financial decisions are grounded in a long-term perspectives, protecting you from knee-jerk reactions and unnecessary losses.

Step #3: Concentrate on What’s Within Your Control

Finally, Graham advocated that you focus your energy on actions and decisions that are directly within your sphere of influence.

Ask: What aspects of my financial life can I control and improve upon, rather than stressing about global events that are beyond my grasp?

By centering your attention on areas where you can make a tangible impact, you enhance your financial well-being while ensuring that you’re proactive in areas that matter most while avoiding unnecessary stress from external factors.

What I’m Reading

We’re all busy in the daily rush of things. That’s why I’m sharing a list of articles that I’ve read this week to help me stay on top of my own financial independence journey.

You can find links to these articles in the daily feed at app.fimastery.com

• The Paradox of the Perfect Life
• Yields Surge as New Regime Plays Out
• European Central Bank Pauses as Inflation Drops Markedly
• Rules for Lifestyle Creep: Live Beneath Your Assets
• Markets Have Suffered A Sea Change
• Where Americans Find Meaning

Thanks for taking a look,

Peter Donisanu