QMV approach
Q = Quality of the Business
M = Integrity and Efficiency of the Management
V = Value or Valuation
Q = Quality of the Business
M = Integrity and Efficiency of the Management
V = Value or Valuation
Wednesday, 15 August 2012
To reach large sums, you only need to save smaller amounts early on.
For selected good quality growth/value stocks, over a 10 years investing horizon, the upside reward/downside risk
= 100% upside gains / 0% downside loss.
The three most important words in the books of Benjamin Graham
Yes, these are the three most important words in the books of Benjamin Graham.
If you have to take home a message from his thick books, it is knowing everything about "Margin of Safety".
Better still, tattoo these three words to your body, so that you can be reminded every minute of the day.
If you have to take home a message from his thick books, it is knowing everything about "Margin of Safety".
Better still, tattoo these three words to your body, so that you can be reminded every minute of the day.
The "Good Investment". Clarify your Investment Goals.
By pinpointing what you think represents value, you can now create your definition of a good investment. You should be able to summarize it in one sentence.
Consider these examples:
Warren Buffett: a good business that can be purchased for less than the discounted value of its future earnings.
George Soros: an investment that can be purchased (or sold) prior to a reflexive shift in market psychology/fundamentals that will change its perceived value substantially.
Benjamin Graham: a company that can be purchased for substantially less than its intrinsic value.
A few more examples:
The Corporate Raider: companies whose parts are worth more than the whole.
The Technical Analyst: an investment where technical indicators have identified a change in the price trend.
The Real Estate Fixer-Upper: run-down properties that can be sold for much more than the investment required to purchase and renovate them.
The Arbitrageur: an asset that can be bough low in one market and sold simultaneously in another at a higher price.
The Crisis Investor: assets that can be bought at fire-sale prices after some panic has hammered a market down.
Coming to your definition of a good investment is easy - if you're clear about the kinds of investments that interest you and have clarified your beliefs about prices and values.
Consider these examples:
Warren Buffett: a good business that can be purchased for less than the discounted value of its future earnings.
George Soros: an investment that can be purchased (or sold) prior to a reflexive shift in market psychology/fundamentals that will change its perceived value substantially.
Benjamin Graham: a company that can be purchased for substantially less than its intrinsic value.
A few more examples:
The Corporate Raider: companies whose parts are worth more than the whole.
The Technical Analyst: an investment where technical indicators have identified a change in the price trend.
The Real Estate Fixer-Upper: run-down properties that can be sold for much more than the investment required to purchase and renovate them.
The Arbitrageur: an asset that can be bough low in one market and sold simultaneously in another at a higher price.
The Crisis Investor: assets that can be bought at fire-sale prices after some panic has hammered a market down.
Coming to your definition of a good investment is easy - if you're clear about the kinds of investments that interest you and have clarified your beliefs about prices and values.
Choose Your Mentor
The fastest way to master anything is to study with a Master of the Art.
If someone has already perfected the method of investing that appeals to you, why reinvent the wheel? Seek him out. If necessary, offer to work for him for nothing (as Buffett offered to Graham).
If that's not possible you can still adopt your mentor by long distance. Read and study everything you can about him and his methods. When you're thinking about making an investment always ask yourself: "What would he do?"
If someone has already perfected the method of investing that appeals to you, why reinvent the wheel? Seek him out. If necessary, offer to work for him for nothing (as Buffett offered to Graham).
If that's not possible you can still adopt your mentor by long distance. Read and study everything you can about him and his methods. When you're thinking about making an investment always ask yourself: "What would he do?"
Spending money is simple - anyone can do it. Making money is not.
Living below your means
Frugality is a natural aspect of Buffett's character. As his wealth increased, he indulged in minor extravagances. He bought an executive jet he named The Indefensible.
But wealth didn't change his natural frugality. It is easy to see how the consequence of living below your means is important when you're starting out. It's the only way you can accumulate capital to invest. What's less obvious is how this mental habit remains crucial to your investment success even after your net worth has soared into the billions.
Very simply, without this attitude to money you won't keep what you have earned. Spending money is simple - anyone can do it. Making money is not. That;s why living below your means is the attitude that underlies the foundation of the Master Investor's success: Preservation of Capital.
Frugality is a natural aspect of Buffett's character. As his wealth increased, he indulged in minor extravagances. He bought an executive jet he named The Indefensible.
But wealth didn't change his natural frugality. It is easy to see how the consequence of living below your means is important when you're starting out. It's the only way you can accumulate capital to invest. What's less obvious is how this mental habit remains crucial to your investment success even after your net worth has soared into the billions.
Very simply, without this attitude to money you won't keep what you have earned. Spending money is simple - anyone can do it. Making money is not. That;s why living below your means is the attitude that underlies the foundation of the Master Investor's success: Preservation of Capital.
Is it working? Always measure and monitor your investments.
You can't tell if something is working unless you measure it.
Set a return on investment for your projects to make a contribution, with a deadline. Monitor the progress towards that at regular (monthly) intervals.
Set a return on investment for your projects to make a contribution, with a deadline. Monitor the progress towards that at regular (monthly) intervals.
"It worked last time?"
How many of your decisions are based on "It worked last time?"
Take another look, and you might see that some of those successful outcomes are random, or - even worse - lucky.
Take another look, and you might see that some of those successful outcomes are random, or - even worse - lucky.
Don't panic more than you have to. Look at the return over years rather than days.
Don't panic more than you have to. Decide measurable standards for what events are a concern, a worry and a big problem, and what you'll do when they happen.
If the value of your pension drops in a stock-market dip, for example, the best advice is often to do nothing, wait for a recovery and look at the return over years rather than days.
If the value of your pension drops in a stock-market dip, for example, the best advice is often to do nothing, wait for a recovery and look at the return over years rather than days.
Subscribe to:
Posts (Atom)