Fake It Till You Make It?
Top 5 of the Week of September 24
Justin J. Carbonneau, partner at Validea Capital Management, heads up our Top 5 this week with a look at why it’s hard being an “intelligent investor” today. Real Investment Advice’s Lance Roberts examines the issues which impact us. And The Irrelevant Investor Michael Batnick looks at public and private companies in the market.
Morgan Housel, a partner at Collaborative Fund, discusses investing on an emotional level. And Preston McSwain, on his Provoking Posts blog, looks at IRR fake news…
The Way Is Hard
- Ben Graham’s book, The Intelligent Investor, is still vastly popular today despite how hard value investing is to perform
- The core tenets of value investing are what makes it so hard for anyone to become a true value investor, these include:
- Being a critical thinker; staying contrarian; understanding we have no control over the future; finding a margin of safety; thinking like a company owner; remaining disciplined; taking advantage of stock prices; not speculating; and being skeptical
Psychological or Financial?
- There have been many articles written about the psychological issues which impact investor returns—but there are also financial issues too
- 50% of investor shortfalls can be accounted for by physchological factors and being your own worst enemy, but it’s also hard to invest when you don’t have the capital—which accounts for 25%
- It’s important to be aware that all negative behaviors are linked by the fact that they can pressure you to deviate from your sound investing strategy—capital or no
What issues impact your investing approach? Share your comments in the section below
Not So Black and White
- The number of US publicly traded companies has halved in the last 20 years, while more private companies are avoiding public markets
- These facts have led to assertions that there aren’t enough IPOs and more dollars are going to venture capitalists while the everyday investor is losing out
- But the issues are not this black and white, no one is “being robbed,” the S&P 500 is up 178% in recent years, venture capitalists are absorbing losses, and there are thousands of public stocks on major exchanges
Who’s in Control?
- We’re not in denial about our emotions controlling us (and our investment money) we just aren’t good at recognizing or understanding them
- Many investors think they’re mostly unemotional people, but given that emotions lie in the gap between what we think can happen and what might actually happen, they’re not always clear
- While confidence, forecasting, optimistic or pessimistic leanings, even goals, and ambition don’t necessarily make us emotional wrecks, they are all still emotive
Fake It Till You Make It?
- While marketing internal rates of return (IRR) is pretty commonplace, private investment firms are inflating them with new techniques and reporting them as returns investors have actually received
- Firms are pitching outperformance comments and backing these up with fancy charts which make it simple to overlook any small print about technical disclosures
- Though it may be a standard historical practice and to all intents and purposes, a legally compliant one, this doesn’t necessarily make it right
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form—and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Become a Better Investor Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.