I wanted to mention one more piece from the Buffett lecture that I thought was important but didn’t want to cram more info into the post.
In it, Buffett was directly asked about dealing with failure and here’s what he said: Continue Reading…
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Buffett on Circle of Competence and Reading
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Warren Buffett has repeatedly explained his process – in a general sort of way – for decades. That gets most of the attention because people want to know the secret sauce so to speak. But it’s really only part of the reason why he’s been so successful.
I dug up an older lecture and Q&A Buffett did in 1994 at the University of Nebraska. If you’ve read other Q&A’s most of it will sound familiar. The same questions get asked over and over and he answers almost verbatim.
But one of the questions stood out – “What do you do all day?” – because his answer doesn’t get covered enough. Continue Reading…
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Happy Hour: Moving Average
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Valuation models, like the CAPE ratio, are great for informing investors where the market stands. The models are meant to show how over or undervalued the market is in relation to its historical average. And if you believe that markets revert to a mean, then at some point any excess valuation will swing back to the norm.
Some people see valuation models as a timing tool except none actually say when. Two questions that rarely get asked are how reliable is mean reversion and how relevant is the historical average? Continue Reading…
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Buffett’s Method of Success
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Buffett regularly makes the difficult, sound very easy. His knack for simplifying things, in a way a mass audience can understand, often gives the false impression that investing is easy.
“Simple, but not easy” best describes it.
Still, his simple messages get misinterpreted often. It leads some people to believe you can do it too without much effort. Others seem to think Buffett has a super secret formula that always spits out winners and he just refuses to share it. Continue Reading…
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Happy Hour: Multiple Choice
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Sometimes we don’t make the obvious choice or the one that makes the most sense or even the favorite.
A scientist ran a study where participants were given a choice between two candy bars. Of course, they picked their favorite. But when the number of choices increased, they were less likely to do so. Continue Reading…
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More Wisdom from The Intelligent Investor Pt. 3
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This is part three of The Intelligent Investor series. I’ve been sharing some of the timeless wisdom from Graham’s groundbreaking book as a way to put my notes to good use. The first part covered the first four chapters of the book and part two covered the next four chapters. This post continues in kind.In chapter nine, Graham explains why the defensive investor should use mutual funds. I’m sure if he could update the book today, he’d offer a similar view on index funds. Chapter ten digs into the role financial advisors play, along with warnings on the role pseudo “advisers” play as well. Finally, chapters eleven and twelve delve into Graham’s thoughts on security analysis generally and how to deal with earnings per share specifically.
Below you’ll find a few random bits of wisdom from each chapter. Continue Reading…