I’ll give you some examples, followed by comments. Since this article is about learning, let’s start with this:
“What we learn from history is that people don’t learn from history.” When investors get either too fearful or too greedy, they sometimes hide behind the notion that “This time it’s different.” Usually they regret it.
On fear and greed
“Two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. … We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” This is the simple recipe for being a contrarian investor. Continue reading “Genius of Warren Buffett with comments:”
The financial markets have come a long way in terms of technology, transparency, accuracy and speed. But there are few basics of the market that never changes, be it thoughts by the great Benjamin Graham, Warren Buffet, Charlie Munger or Peter Lynch.
Here are some thoughts by Jesse Livermore written in 1940 and they apply in today’s market scenario as well:-
- Nothing new ever occurs in the business of speculating or investing in securities and commodities
- Money cannot consistently be made trading every day or every week during the year
Continue reading “10 More Trading rules”
You have some money in your bank. You decided to invest some money in the common stocks. You have reached on this decision as you want to have more income than if you would these funds in other way .History might be irrelevant to most of you but we compare the returns by looking at the past. It’s more fun and interesting to find some excellent companies in the market. Valuations may matter but that’s secondary to identifying the top-notch business. Here are some questions by Philip A. Fisher that will help in identifying the common stock with uncommon profits 🙂
- Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
- Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited? Continue reading “Common Stocks and Uncommon Profits”
The single greatest mistake investors make is to extrapolate recent history out into the future. They take the financial returns of the past 5 days or 5 years or even 50 years and assume the next few days or years will look just the same without any consideration for the historical context or conditions that provided for those returns.
They forget that, while ‘history may rhyme, it doesn’t repeat itself’ (Twain). Or that, “the only thing that is constant is change” (Heraclitus). These two famous quotes apply to the financial markets as much as anything.
Ignoring these truths and instead simply extrapolating is why investors are suckered into pouring money into the stock market only after a run of great performance. They believe that the recent gains are about to repeat to their great benefit when they should be thinking about what conditions allowed for those gains to take place and analyzing whether they are still relevant or not. Continue reading “History may rhyme it doesn’t repeat itself”
When someone takes short-term position in stocks and suffers loss, He will not book loss against it rather say I am a long-term investor now. The truth is saying “I’ll be greedy when others are fearful” is much easier than actually doing it.
Here are some more points from my previous posts ensuring why investors go wrong most of the time.
- The gulf between a great company and a great investment can be extraordinary.
- Not a single person in the world knows what the market will do in the short run. End of story.
- The analyst who talks about his mistakes is the guy you want to listen to. Avoid the guy who doesn’t — his are much bigger.
- You don’t understand a big bank’s balance sheet. The people running the place and their accountants don’t, either. Continue reading “The ugly truth about Investing”