Tsumitate Wrestler wrote: ↑Fri May 02, 2025 4:46 am
And here I was thinking the savvy investor was the one who didn't buy a losing stock, because they just bought the whole market, and they do not have to deal with the scenario in the first place.
I'm sure the most savviest of investors could be forgiven for having one or two losing positions if they have over 100 investments.
BTW, if you 'buy the whole market' it doesn't mean that every component will be profitable. In your fund you will have the next Enron along with an assortment of other garbage.
Tsumitate Wrestler wrote: ↑Fri May 02, 2025 4:46 am
And here I was thinking the savvy investor was the one who didn't buy a losing stock, because they just bought the whole market, and they do not have to deal with the scenario in the first place.
I'm sure the most savviest of investors could be forgiven for having one or two losing positions if they have over 100 investments.
BTW, if you 'buy the whole market' it doesn't mean that every component will be profitable. In your fund you will have the next Enron along with an assortment of other garbage.
Roughly 90% of Active Equity Fund Managers Underperform Their Index
Oh goody, we haven't had a passive vs active fight in a while.
My position is that I tried active investing when I first got into investing and I just kept picking loser after loser even though I thought my picking process was sound (had to throw away that dart board).
That and my preference to do other things with my life and not stare at stock tickers all day, convinced me that passive investing is good enough. I might not hit on meme stocks like GameStop or whatever the hell Tesla and Nvidia are doing but I tell myself probably wouldn't have been able to pick them out anyways so I'm ok with that.
Tsumitate Wrestler wrote: ↑Fri May 02, 2025 4:46 am
And here I was thinking the savvy investor was the one who didn't buy a losing stock, because they just bought the whole market, and they do not have to deal with the scenario in the first place.
I'm sure the most savviest of investors could be forgiven for having one or two losing positions if they have over 100 investments.
BTW, if you 'buy the whole market' it doesn't mean that every component will be profitable. In your fund you will have the next Enron along with an assortment of other garbage.
Roughly 90% of Active Equity Fund Managers Underperform Their Index
The unproductive contact between finance directors and analysts provides an opportunity for the individual investor – the rewarding opportunity to ignore it. You aren’t party to earnings guidance, but it doesn’t matter, because the information such guidance provides has little to do with the substance of the business. You don’t have to remain popular with company management to do your job. You don’t have to worry that you will be fired if you underperform the market in one quarter, or several. Being close to the market is not necessarily an advantage. Occasionally fund managers have developed such a strong reputation with investors that they can ignore the braying of analysts and the pressures of the dysfunctional cycle of earnings management and guidance. While Buffett was criticised for refusing to participate in the New Economy bubble, he could laugh all the way to the bank, and the steak house. In Omaha, Nebraska, far away from Wall Street.
Best of all, you can emphasise absolute, rather than relative, returns. That emphasis enables the intelligent investor to focus on the analysis of fundamental value, rather than the mind of the market. For the intelligent – and therefore patient – investor, there is a simple reconciliation between the mark-to-market and fundamental-value principles: an asset is worth the higher of its fundamental value and its market price. If the market price is above fundamental value, an intelligent investor can sell for the market price and look for something else.
If the market price is below fundamental value, an intelligent investor can continue to hold and enjoy the benefit of the projected stream of cash returns. This freedom gives the intelligent investor an immediate advantage over the majority of professional fund managers, bound by the routine of quarterly performance measurement. For the professional fund manager, the mark-to-market principle rules – an asset is worth what someone is willing to pay for it.
Being able to take a detached view of fundamental value is a big advantage. But it is not easy. Estimating fundamental value requires a view of the long-term prospects of the company. The information you need is extensive, difficult to obtain and changes constantly. The analysis of fundamental value is speculative, and different people are likely to come up with different answers. In the next chapter I’ll look at what is required.
I'm sure the most savviest of investors could be forgiven for having one or two losing positions if they have over 100 investments.
BTW, if you 'buy the whole market' it doesn't mean that every component will be profitable. In your fund you will have the next Enron along with an assortment of other garbage.
Roughly 90% of Active Equity Fund Managers Underperform Their Index
The unproductive contact between finance directors and analysts provides an opportunity for the individual investor – the rewarding opportunity to ignore it. You aren’t party to earnings guidance, but it doesn’t matter, because the information such guidance provides has little to do with the substance of the business. You don’t have to remain popular with company management to do your job. You don’t have to worry that you will be fired if you underperform the market in one quarter, or several. Being close to the market is not necessarily an advantage. Occasionally fund managers have developed such a strong reputation with investors that they can ignore the braying of analysts and the pressures of the dysfunctional cycle of earnings management and guidance. While Buffett was criticised for refusing to participate in the New Economy bubble, he could laugh all the way to the bank, and the steak house. In Omaha, Nebraska, far away from Wall Street.
Best of all, you can emphasise absolute, rather than relative, returns. That emphasis enables the intelligent investor to focus on the analysis of fundamental value, rather than the mind of the market. For the intelligent – and therefore patient – investor, there is a simple reconciliation between the mark-to-market and fundamental-value principles: an asset is worth the higher of its fundamental value and its market price. If the market price is above fundamental value, an intelligent investor can sell for the market price and look for something else.
If the market price is below fundamental value, an intelligent investor can continue to hold and enjoy the benefit of the projected stream of cash returns. This freedom gives the intelligent investor an immediate advantage over the majority of professional fund managers, bound by the routine of quarterly performance measurement. For the professional fund manager, the mark-to-market principle rules – an asset is worth what someone is willing to pay for it.
Being able to take a detached view of fundamental value is a big advantage. But it is not easy. Estimating fundamental value requires a view of the long-term prospects of the company. The information you need is extensive, difficult to obtain and changes constantly. The analysis of fundamental value is speculative, and different people are likely to come up with different answers. In the next chapter I’ll look at what is required.
Why would pre-cost returns be a useful metric to an individual investor?
