Author Topic: Good investment article in WSJ  (Read 2381 times)

Johnny Aloha

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Good investment article in WSJ
« on: July 26, 2013, 11:38:55 AM »
Here's the link: http://blogs.wsj.com/moneybeat/2013/06/28/the-intelligent-investor-saving-investors-from-themselves/?mod=trending_now_5

I enjoyed the article because I agree with the philosophy on investing, and am very happy with investing in a couple Vanguard funds.  It's effortless.

MitchMiller

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Re: Good investment article in WSJ
« Reply #1 on: July 26, 2013, 10:53:59 PM »
What you're missing is that for most "active" investors, the "investing" is a thrill.  Hopefully you make money at it, but it is downright fun!  I'll take the US stock market any day over Las Vegas. 

The point is that it always isn't about making more they the S&P index when you're really having a lot of fun trying.  And when you occasionally do hit that homerun, all I can say is that it's a lot more exciting than any I've witnessed in the ball park!

AlmostIndependent

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Re: Good investment article in WSJ
« Reply #2 on: July 27, 2013, 09:57:01 AM »
If you're investing for the fun of it then I would argue it's more entertaining yourself with investments than investing. Not to say that there's anything wrong with that; the article was just directed at people who want to invest for steady gains not the thrill of picking a hot stock.

zunachy

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Re: Good investment article in WSJ
« Reply #3 on: July 28, 2013, 01:24:27 AM »
Thank you for the link.  This person seems to have a very clear view on things.  The writing style is a joy to read as well.

...

1. Almost every single day workers and managers of US corporations come in to work and increase the intrinsic value of their companies.

2. During those very same days owners and potential owners of the very same corporations quote prices for those very same companies. 

The fact that those quotes are real, and are expressed in US dollars with which you can pay taxes and obtain goods and services is just a byproduct really. 

This byproduct is great because it provides liquidity

The byproduct is also terrible because it can at times evoke primitive human emotions which then prevent clear analysis of 1. and 2.

...

In my opinion -- the article only talks about item 2.  It briefly mentions item 1., indirectly as the mean.  Item 1. is more than just the mean of course -- it is the great Capitalism of America -- to which we owe our standard of living and so much more.   

Yes, if the price of some asset goes up then it is possible that it is out of sync with its intrinsic value.  But it is also quite possible that the intrinsic value went up as well.  Or it is possible that the intrinsic value for that asset is impossible to understand and calculate.     

Given this my advice -- on what to do if the price goes up -- would be a bit different:

a. If the price of an asset goes up, try to understand if the real intrinsic value of the asset went up as well.  If it did then great.  Especially if the intrinsic value increased in the way you thought it would when you first bought the asset.  This then means that you are a good investor -- you analysed the business beforehand, and saw the likelihood of this occurrence -- the intrinsic value went up, and the quote for that value is fairly reflected. 

b. If the price of an asset went up, but the intrinsic value stayed the same or went down, then that is just that.  You have a situation where something is worth X, but is now being bought and sold for a price greater than X.   You can try to take advantage of the situation -- however, you will not be betting on business performance, but rather on the hope that the price and value will converge in due time.  This strategy has time working against it thought, and that is something you should avoid.

c. If the price of an asset went up, but the intrinsic value cannot be determined -- then that is just that as well.  Leave it to beaver, not much can be done here.