Being able to think independently is the best way to invest successfully.
There are two ways to value investing.
1. Graham type value investing (Classic Value Investing).
One approach involves buying shares in beaten-up companies whose share prices had become depressed and looked cheap.
Occasionally, some investments would pay off, but more often than not they didn't.
These shares can be cheap for a reason; they are shares of bad or mediocre companies.
You are unlikely to get a great tasting wine when you buy a cheap bottle of wine.
2. Buying growing high quality companies at reasonable prices (Growth Investing)
The better investing is about investing in great companies buy buying their shares at reasonable prices and holding on to them for a long time.
Great companies generate high levels of profits or cash flows on the money they invest.
The investor's job is to buy the shares of these companies when their share prices offer you an acceptable return on your investment.
Combining quality companies and a reasonable purchase price, and adding in the factor of time, put one well on the way to a successful investing career.
Portfolio Management
You do not need to know everything about a company to be a successful investor.
In fact, too much information can be bad for you.
If you have a company's latest annual report and its current share price you have all the information you need to invest profitably.
From this information, you can work out
Doing in-depth analysis for companies you are considering as investments will empower you with knowledge and understanding about a company which less diligent investors will not be aware of.
Investors do not need to own lots of companies.
A portfolio of 10 to 15 companies spread across different industries is sufficient to get good, diversified investment results.
You must be confident in trusting your own judgement whilst ignoring the huge amount of noise and chatter that goes on in the investing world.
There are two ways to value investing.
1. Graham type value investing (Classic Value Investing).
One approach involves buying shares in beaten-up companies whose share prices had become depressed and looked cheap.
Occasionally, some investments would pay off, but more often than not they didn't.
These shares can be cheap for a reason; they are shares of bad or mediocre companies.
You are unlikely to get a great tasting wine when you buy a cheap bottle of wine.
2. Buying growing high quality companies at reasonable prices (Growth Investing)
The better investing is about investing in great companies buy buying their shares at reasonable prices and holding on to them for a long time.
Great companies generate high levels of profits or cash flows on the money they invest.
The investor's job is to buy the shares of these companies when their share prices offer you an acceptable return on your investment.
Combining quality companies and a reasonable purchase price, and adding in the factor of time, put one well on the way to a successful investing career.
Portfolio Management
You do not need to know everything about a company to be a successful investor.
In fact, too much information can be bad for you.
If you have a company's latest annual report and its current share price you have all the information you need to invest profitably.
From this information, you can work out
- whether the company is good or bad, (Is it a quality business?)
- whether it is safe or dangerous, (Is it a safe business? ) and
- whether its shares are cheap or expensive. (Are its shares cheap enough - are they good value?)
Doing in-depth analysis for companies you are considering as investments will empower you with knowledge and understanding about a company which less diligent investors will not be aware of.
Investors do not need to own lots of companies.
A portfolio of 10 to 15 companies spread across different industries is sufficient to get good, diversified investment results.
You must be confident in trusting your own judgement whilst ignoring the huge amount of noise and chatter that goes on in the investing world.
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