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Investment Wisdom from Others
galumay:
Some good stuff in here too,
http://csinvesting.org/wp-content/uploads/2014/07/090810_Hummingbird_Investment_Strategy_-_final1.pdf
galumay:
Buffet, risk & volatilty (beta)
"Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments � far riskier investments � than widely-diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions. That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray."
galumay:
Risk means more things can happen than will happen
Even if you know whats most likely, many other things can happen instead.
Risk means uncertainty about which outcome will occur and about the possibility of loss when the unfavorable ones do.
�The riskiest things: The greatest risk doesn�t come from low quality or high volatility. It comes from paying prices that are too high. This isn�t a theoretical risk; it�s very real.�
�When everyone believes something is risky, their unwillingness to buy usually reduces its price to the point where it�s not risky at all. Broadly negative opinion can make it the least risky thing, since all optimism has been driven out of its price.�
�This paradox exists because most investors think quality, as opposed to price, is the determinant of whether something�s risky.�
�So even though the first tenet in Oaktree�s investment philosophy stresses �the importance of risk control,� this has nothing to do with risk avoidance.�
galumay:
�� Rule number one: most things will prove to be cyclical.
� Rule number two: some of the greatest opportunities for gain and loss come when other people forget rule number one.�
�In fact, I�ve recently boiled down the main risks in investing to two: the risk of losing money and the risk of missing opportunity. It�s possible to largely eliminate either one, but not both.�
�The desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing�-these factors are near universal. Thus they have a profound collective impact on most investors and most markets. The result is mistakes, and those mistakes are frequent, widespread and recurring.�
�from Demosthenes: �Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true.�
�The desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing�these factors are near universal. Thus they have a profound collective impact on most investors and most markets. This is especially true at the market extremes. The result is mistakes�frequent, widespread, recurring, expensive mistakes.�
�To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit.
SIR JOHN TEMPLETON�
�Skepticism is usually thought to consist of saying, �no, that�s too good to be true� at the right times. But I realized in 2008�and in retrospect it seems so obvious�that sometimes skepticism requires us to say, �no, that�s too bad to be true.�
galumay:
�It�s our job as contrarians to catch falling knives, hopefully with care and skill. That�s why the concept of intrinsic value is so important. If we hold a view of value that enables us to buy when everyone else is selling�and if our view turns out to be right�that�s the route to the greatest rewards earned with the least risk.�
�A high-quality asset can constitute a good or bad buy, and a low-quality asset can constitute a good or bad buy. The tendency to mistake objective merit for investment opportunity, and the failure to distinguish between good assets and good buys, get most investors into trouble.�
Economic forecasts are like a broken watch, most of them, most of the time, will be incorrect by varying amounts, occasionally they will be spot on, but the ones that were correct in one moment will be wrong for the rest of them. Remember a broken clock tells the correct time twice a day.
�In good years in the market, it�s good enough to be average. Everyone makes money in the good years, and I have yet to hear anyone explain convincingly why it�s important to beat the market when the market does well. No, in the good years average is good enough.�
Excerpt From: Howard Marks. �The Most Important Thing Illuminated.� iBooks. https://itun.es/us/NzlKE.l
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