Fundamental Investing: Problems with the Gurus?

Graham actually mentions that institutional investors often can't make the best investment decision as their motivation is the marketability of the fund so in essence, institutional funds start at a disadvantage that is very difficult to overcome. Besides, each person who reads these books make their own interpretation of what was written. Most people will be looking for guidelines on the selection of stocks, of how to identify an investment opportunity with better probabilities of a favourable return and will overlook little details such as Ben Graham admonition that 45% should be invested in stocks and 55% in bonds without wondering about why that is the case. People will often watch Warren Buffet's MBA speech and fail to see the significance in the russian roulette analogy when he was commenting on the failure of LTCM. Those two seemingly unrelated details refers to the limits of reasonable risk and that an otherwise positive expected value situation could be turned into a money loser by excessive risk. Very few business schools will even teach you about the geometric or logarithmic approaches which show that risk adjusted returns are a quadratic function with respect to risk not a straight risk reward ratio. If you simply took the Markowitz efficient frontier concept, you would think that a Powerball lottery was always worth mortgaging the house once the jackpot exceeded $200 million but in fact there is a limit to reasonable risk that isn't modeled by a straight risk reward ratio but is with a logarithmic utility of wealth. Perhaps you need to change your focus from what to invest in to how much to risk with each investment.