Buying assets for less than they are worth is fundamentally at the heart of most sensible investment strategies. However, approaches to identifying value can range widely, from direct attempts to value businesses to approaches that exploit the systematic behavioural errors that other investors make (resulting in ‘factors’).
In my view detailed valuation exercises are generally too arbitrary and difficult and so are a bit of a waste of time compared to basing a strategy on statistical factors (e.g. quality, value, momentum). However, some simple valuation modelling can have incremental value if you understand its limitations and get the rest of your investing framework right. Continue reading
The inspiration for this post is a book I read recently called ‘Superforecasting: the art and science of prediction’ by Philip Tetlock and Dan Gardner. It’s a good read with quite a few interesting insights. The possible applications of these insights to investing really struck a chord with me. Continue reading
I’ve been reading up quite a bit on factor investing recently. This has prompted me to want to share my thoughts on some of the different ways of implementing approaches based on factors and how they generate alpha. Continue reading
Not that long ago I used to get my ideas from various articles and tips and then try my best to do further research to make the ideas ‘my own’. Unfortunately this is a bit like trying to learn how to play darts by watching a monkey play. One of the things I haven’t explained here yet is how I screen for the investment ideas that go on my watchlist. Continue reading
Are you a trader or an investor?
Trick question – the ‘correct’ answer is both (or neither). But underneath this flippancy lies an important distinction – ‘investing’ and ‘trading’ are not mutually exclusive but are different ways of thinking about buying and selling shares.
I’ve always thought of myself as an investor, but recently I’ve started to wonder whether if I want to make real money it would help to think a bit more ruthlessly about winning the game, like a trader. Continue reading
Many of the investors I follow advocate concentration and run extremely concentrated portfolios. For example, Warren Buffett says that he operated mostly with five positions. From the other end of the spectrum, momentum trader Mark Minervini, who I have become interested in recently due to his quite stunning results and apparently quite straightforward and intuitive strategy, advocates a similarly concentrated portfolio.
I am happy with the performance of my strategy so far but I have begun to question whether perhaps I can do better through concentrating my portfolio on fewer investments. Continue reading
Over-trading is one of the most commonly reviled sins in investing and is often cited as a reason that investors should avoid active fund management. It’s a crime of which I’ve often worried I might be guilty, so I’ve decided to have a direct look at it. Continue reading