The primary goal of value investors is to avoid losing money.
Three elements of a value-investment strategy make achievement of that goal possible.
1. A bottom-up approach, searching for low-risk bargains one at a time through fundamental analysis, is the surest way I know to avoid losing money.
2. An absolute performance orientation is consistent with loss avoidance; a relative-performance orientation is not.
3. Finally, paying careful attention to risk - the probability and amount of loss due to permanent value impairments - will help investors avoid losing money.
So long as generating portfolio cash inflow is not inconsistent with earning acceptable returns, investors can reduce the opportunity cost resulting from interim price declines even as they achieve their long-term investment goals.
Three elements of a value-investment strategy make achievement of that goal possible.
1. A bottom-up approach, searching for low-risk bargains one at a time through fundamental analysis, is the surest way I know to avoid losing money.
2. An absolute performance orientation is consistent with loss avoidance; a relative-performance orientation is not.
3. Finally, paying careful attention to risk - the probability and amount of loss due to permanent value impairments - will help investors avoid losing money.
So long as generating portfolio cash inflow is not inconsistent with earning acceptable returns, investors can reduce the opportunity cost resulting from interim price declines even as they achieve their long-term investment goals.
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