Novel Investor • Compounding investing wisdom...

Happy Hour: Right Now or Much Later On

April 28, 2017

·

Jon

Show me an investor who wants great returns right now and I’ll show you an investor who wants persistently great returns while avoiding losses too. This strategy has been pursued and promised since the dawn of time.

The problem is it doesn’t exist. You can’t have it both ways but people continue to chase the dream.

In the Luncheon Speech I referenced a few days ago, Peter Lynch was asked a question on shareholders rights and whether shareholders should be more involved in business decisions. Here’s his response (emphasis mine): Continue Reading…
Peter Lynch: The Single Most Important Thing

April 26, 2017

·

Jon

You can add to this to the list of most important things every investor should know.

Know what you own!

Peter Lynch thought that was the “single most important thing” for investors. He quickly followed it up with: know why you own it.

It seems simple enough but how many people do? We have a world of information at our fingertips but I doubt much has changed since Lynch uttered those words over two decades ago. Continue Reading…
Happy Hour: Doing Nothing

April 21, 2017

·

Jon

Most of the Peter Lynch stuff I’ve dug up recently are archived articles from pre-internet days. One of his better articles did make it online. His 1995 article titled Fear of Crashing was republished just last month.

The title says it all. There must have been some worry of a crash back in 1995 since Lynch decided to address it.

Of course, fears of a crash pop up on a regular basis. But it starts with doubt. Pundits make their annual claims why this is the year the bear market returns. If the stories seem plausible, it might sow seeds of doubt. Doubt can lead investors to try to avoid the next correction. Continue Reading…
Happy Hour: Falling Short

April 14, 2017

·

Jon

The latest SPIVA Scorecard on the U.S. fund industry was released this week. Only 8% of large-cap, 5% of mid-cap, and 7% of small-cap fund managers beat their benchmarks over the past 15 years.

That’s pitiful. It shouldn’t be a surprise either.

Common sense says there are too many mutual funds to manage and not enough great money managers to go around. Just like anything else that requires skill, there’s a limited number of “best” people. The rest are average, mediocre, or worse. Continue Reading…
Happy Hour: Jelly Beans and the Stock Market

April 7, 2017

·

Jon

Joel Greenblatt recently did a Talks at Google (video is embedded below). You might remember him from such books as The Little Book that Beats the Market and You Can Be a Stock Market Genius. He also ran a very concentrated portfolio that produced mind-boggling returns.

Greenblatt told the story about recently teaching a class of 9th graders. He started the class with an experiment. He brought in a big jar full of jelly beans, passed out index cards, and asked the kids to guess the number of jelly beans in the jar.

So the kids tried to count the individual jelly beans or the rows of jelly beans or found some other ways to come up with their best guess. Then they wrote their guess on their card. Continue Reading…
Charlie Munger on Dexter Shoes and Handling Mistakes

April 5, 2017

·

Jon

Mistakes are part of investing. There’s no way around it. So you might as well expect mistakes eventually, learn from it, and move forward. Just make sure that those mistakes don’t set you back so much that you can’t move forward.

Being properly diversified is one way to do that. In other words, you can make a few mistakes but your other investments make up for it and more.

Margin of safety is another. Leaving room for error goes a long way in reducing losses.

After the this year’s Daily Journal Annual meeting, Charlie Munger stuck around for more questions (a transcript of that Q&A session in the Library). He was asked how he handles learning from mistakes, which led to another question on Dexter Shoes. Here’s what he said: Continue Reading…

Happy Hour: Right Now or Much Later On

Peter Lynch: The Single Most Important Thing

Happy Hour: Doing Nothing

Happy Hour: Falling Short

Happy Hour: Jelly Beans and the Stock Market

Charlie Munger on Dexter Shoes and Handling Mistakes