Do you know how to differentiate between value investing and growth investing, or for that matter value investing with any other form of investing? I will leave this for readers of TIPBlog to ponder over it. However, I would like to say one thing; I do not know how to differentiate. I invest with an objective to grow my capital. It does not matter where it comes from. Hold on, don’t pass a judgment yet.
Let us take an example. Late last year, Buffett bought a whole rail company, Burlington Northern Santa Fe. On per share basis, the price paid by Buffett was (1) 31.5% premium to prevailing market price at the time of announcement; and (2) Approximately, 15 PE ratio at the time of announcement.
At first glance, these two matrices will tell you, “that was not cheap!”. That’s because in today’s world of instant gratification, we have come to believe PE ratio and/or current premiums are only ratios that determines value. We have dropped the meaning of value to few parameters. Small time investors like you and me would jump to take 31% premium and declare victory. But 20 years down the road, Buffett is likely to be basking in glory. Continue reading rest of this article…
Ask this question to people across different spectrum and you will get as many answers as there are spectrums.
- Conservatives will tell you stock market is nothing short of gambling. It demonstrates lack of understanding what stock market really means.
- Broker will tell you buy today, sell tomorrow. It shows what is the motivation; jacking up transactions and fees. Holding for more than few days is not in his interest.
- I can go on an on like this …. but you get the point. Right?
We all want to succeed in making some good money, some quick money, and/or some money. It is my belief that most of the individuals will lose money in stock market over their lifetime. Whether we admit it publicly or not, it is a reality. I do not doubt that people sincerely want to succeed at investing, but the only issue is they do not know how. So they try to follow something that appears to be succeeding. A fund manager or business honcho mentions some stocks or strategy that is doing good in the market, and they jump on board. Only to realize later that they are late to the party. With little drop they jump off and then try to latch on something else, or many times they say, “I am out of the market”. It is a fashion to use market lingo’s. Continue reading rest of this article…
TIP Guy
3 October 2009
life
Habits and Addictions are two terms we use in many contexts in our daily lives. At the root of it, it is and action/activity that one has to do at regular frequency or in certain way or at specific time, etc you get the point right. Now, if those necessary activities or actions are good we call it habits (in most context), and if those activities or actions are bad we term it as additions. In investing, we individuals need to develop habits.
I have seen lot of people who are so obsessed with market or SENSEX that they keep following hour by hour, on SMS’, on computer, and what not. They do not lose a single opportunity to see what’s happening to their stock holdings. If they are working on computer, they keep ticker monitor or browser window open to keep track of SENSEX movements. We all know that in short term markets are going to behave irrationally. You do not hold Index Funds or ETFs, and are still worried about what is SENSEX or NIFTY doing? How is holding individual stocks related to index? Index is a weighted average, and hence will have stocks above average and below average. If you are constantly watching and tracking your stocks, you will make an emotional decision. You may sell at wrong price or you may get rid of that good stock, or you may just buy a crappy stock. Irrespective of what it is, addictions are bad. And this addiction to keep track is bad for investing success.
Continue reading rest of this article…
In last one year or so, how many times have you heard and read that “Buy and hold investing is dead”. I bet it is numerous times. I am willing to bet even more on the fact that almost 95% of 30 year old or below will make you believe buy and hold is dead and it does not work. And the examples cited are turmoil in 2008. In addition, the business media and brokerage houses will add fuel to this fire. Well, if they do not encourage you to trade, how will they survive? how will they get their commissions?
To me all these 95% of folks are “creating their own missed opportunity”. Twenty years down the line when these same folks look back on “today”, they will realize they missed an opportunity. They missed this opportunity because of their quest to make that quick buck in trade, the lack of real knowledge, lack of awareness, and lack of foresight, and not able to think what is important in investing.
Continue reading rest of this article…
