Restoring Traders/Investors Faith into Investing
- Thread starter Einstein
- Start date
- Tags portfolio tracker value investing warren buffett
I hope you know who was that next door neighbour.
Any sane person would do the same thing what his neighbour did, it is you who are thinking now not back in 1960s/50s.
There is no one who could judge ex-ante return and that is what you are trying to do when you giving those examples. If you look at his letters from 1955 then he also compared his returns to 4 benchmarks and why he did that because he wanted to show that he is performing better than the benchmark and he always believed in longer horizon.
You do not need to screw it up, yes that's correct but by expecting people to invest with you when you do not have track record is like you are asking people that invest with you because you have a million dollar idea which is not yet proven.
This is highly rewarding industry and you need to look for that one chance. And what if you do not get a chance the you are already performing at 30%+ year is simply incredible which will give you 50x returns on your invested capital. You do not need to chase 2 and 20.
I hope you take this in right spirit.
Any sane person would do the same thing what his neighbour did, it is you who are thinking now not back in 1960s/50s.
There is no one who could judge ex-ante return and that is what you are trying to do when you giving those examples. If you look at his letters from 1955 then he also compared his returns to 4 benchmarks and why he did that because he wanted to show that he is performing better than the benchmark and he always believed in longer horizon.
You do not need to screw it up, yes that's correct but by expecting people to invest with you when you do not have track record is like you are asking people that invest with you because you have a million dollar idea which is not yet proven.
This is highly rewarding industry and you need to look for that one chance. And what if you do not get a chance the you are already performing at 30%+ year is simply incredible which will give you 50x returns on your invested capital. You do not need to chase 2 and 20.
I hope you take this in right spirit.
Your comments are always welcome, Not sure what exactly you're trying to say though. But im also not looking forward to manager other people's money, I have job for my bread and butter and i think I can keep investing my pennies on regular intervel.
Anyways anyone read mahabharat's story of nalan?? It is a great story every trader should read. Nalan was the king of Nishadha Kingdom in ancient india. He was a perfect human being, a king tighteous and kind hearted king, who suceeded in marying a beautiful wife. but he only had one bad habbit which was gambling.
His opponent saw that bad habbit and tricked nalan to bet his whole kingdom in the game of dice. nalan was not able to see this and was lost his kingdom to that demon king kali. (not kali mata). he was orderd to left the kingdom with his newly wed wife and go to jungle. later on the demon trick him again and get even the last piece of cloth on his body. a terrible story. sometimes later he meet someone named Rituparna, he told Nala that he can tell the exact number of leaves on the tree. He told nala that this tree have x number of leaves in it. Nala didn't believes him so he cut down the tree and count the number of leave himself whole night, Rithupura was right. Nala was impressed by him and his gambling knowledge and he pursuade Rithuparna to teach him the act of gambling. Rithuparna agreess to teach him with only condition that it can only be whispered in ears as it is an secretive art.
with this new knowledge of gambling nala went to his kingdom again and bet his wife to the evil king. he now know that now he is not gambling so it was not exactly gambling now!!!. After few bets he won his entire kingdom back and lived in his palace peacefully.
We have a mathematical theory named 'theory of probability'. if anyone tries to understand the equation it is quite simple, it is the exactly what Rithupura used thousands of years ago in gambling. He was counting the number of leaves in a branch of tree and calculation the probability of total number of leaves on that tree. Nala used it in the game of dice and won.
Anyways anyone read mahabharat's story of nalan?? It is a great story every trader should read. Nalan was the king of Nishadha Kingdom in ancient india. He was a perfect human being, a king tighteous and kind hearted king, who suceeded in marying a beautiful wife. but he only had one bad habbit which was gambling.
His opponent saw that bad habbit and tricked nalan to bet his whole kingdom in the game of dice. nalan was not able to see this and was lost his kingdom to that demon king kali. (not kali mata). he was orderd to left the kingdom with his newly wed wife and go to jungle. later on the demon trick him again and get even the last piece of cloth on his body. a terrible story. sometimes later he meet someone named Rituparna, he told Nala that he can tell the exact number of leaves on the tree. He told nala that this tree have x number of leaves in it. Nala didn't believes him so he cut down the tree and count the number of leave himself whole night, Rithupura was right. Nala was impressed by him and his gambling knowledge and he pursuade Rithuparna to teach him the act of gambling. Rithuparna agreess to teach him with only condition that it can only be whispered in ears as it is an secretive art.
with this new knowledge of gambling nala went to his kingdom again and bet his wife to the evil king. he now know that now he is not gambling so it was not exactly gambling now!!!. After few bets he won his entire kingdom back and lived in his palace peacefully.
We have a mathematical theory named 'theory of probability'. if anyone tries to understand the equation it is quite simple, it is the exactly what Rithupura used thousands of years ago in gambling. He was counting the number of leaves in a branch of tree and calculation the probability of total number of leaves on that tree. Nala used it in the game of dice and won.
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Nice post, RocketSingh and Einstein. Follow your post as it always has some informative values or insights. Re. Comment of RocketSingh, what he is trying to say, is that on hindsight, it seems that the hardworking Salesman made a mistake in refusing Warren Buffet's offer of investing 10,000$ (Which is a huge sum, for a salaried person a few decades back, even in the US) But that is not the point. The point is, to one Warren Buffet, there would be 1,000 other failed investment managers or gurus, who would have asked to be funded similarly, and in many cases, there would have lost out on their entire saving, and there is no way to know which 10,000$ bet could become a billion, or ten or hundred million, (extreme low probability) as compared to one which could be a scam, or lose money, or just give mediocre return (high probability) (Hindsight Bias)
BTW. was reading something today morning, and as you are a fan of Warren Buffet, (and by default Charlie Munger) quoting here :
Charlie Munger, right-hand adviser to Warren Buffet, the richest man on the planet, is known for his unparaelled clear thinking and near failure proof track record. How did he refine his thinking to help build a 3 trillion $ business in Berkshire Hathaway? The answer is 'mental models' or 'analytical rules of thumb' pulled from discipline outside of investing, ranging from physics to evolutionary biology. 80 to 90 models have helped Charlie Munger develop, in Warren Buffet's words, 'The best 30 second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you finish the sentence' Charlie Munger likes to quote Charles Darwin. 'Even people who aren't geniuses, can outthink rest of the mankind, if they develop certain thinking habits.
Mental models : as explained by Herbert Simon, Nobel Laureate : “The better decision maker has at his/her disposal repertoires of possible actions; checklists of things to think about before he acts; and he has mechanisms in his mind to evoke these, and bring these to his conscious attention when the situations for decision arise.”
The link below gives tabs on different mental models on Thinking, economics, business, finance etc.
http://www.thinkmentalmodels.com/page116/page119/page119.html
One explanation on Intrinsic Value (DCF/Replacement Cost)
From 'Security Analysis', 1940 Edition, by Benjamin Graham and David Dodd:
We must recognize, however, that intrinsic value is an elusive concept. In general terms it is understood to be that value which is justified by the facts, e.g., the assets, earnings, dividends, definite prospects, as distinct, let us say, from market quotations established by artificial manipulation or distorted by psychological excesses. It is not sufficient to know what the past earnings have averaged...
***
BTW. was reading something today morning, and as you are a fan of Warren Buffet, (and by default Charlie Munger) quoting here :
Charlie Munger, right-hand adviser to Warren Buffet, the richest man on the planet, is known for his unparaelled clear thinking and near failure proof track record. How did he refine his thinking to help build a 3 trillion $ business in Berkshire Hathaway? The answer is 'mental models' or 'analytical rules of thumb' pulled from discipline outside of investing, ranging from physics to evolutionary biology. 80 to 90 models have helped Charlie Munger develop, in Warren Buffet's words, 'The best 30 second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you finish the sentence' Charlie Munger likes to quote Charles Darwin. 'Even people who aren't geniuses, can outthink rest of the mankind, if they develop certain thinking habits.
Mental models : as explained by Herbert Simon, Nobel Laureate : “The better decision maker has at his/her disposal repertoires of possible actions; checklists of things to think about before he acts; and he has mechanisms in his mind to evoke these, and bring these to his conscious attention when the situations for decision arise.”
The link below gives tabs on different mental models on Thinking, economics, business, finance etc.
http://www.thinkmentalmodels.com/page116/page119/page119.html
One explanation on Intrinsic Value (DCF/Replacement Cost)
From 'Security Analysis', 1940 Edition, by Benjamin Graham and David Dodd:
We must recognize, however, that intrinsic value is an elusive concept. In general terms it is understood to be that value which is justified by the facts, e.g., the assets, earnings, dividends, definite prospects, as distinct, let us say, from market quotations established by artificial manipulation or distorted by psychological excesses. It is not sufficient to know what the past earnings have averaged...
***
@DSM hi, check this post. http://www.traderji.com/fundamental...tors-faith-into-investing-68.html#post1021688 point 3 and 4. Its a quote from an economics professor. what do you think about it?? Buffett closed his partnership within a decade, he retired before being eligible to be 'termed' as a successful money manager.
Einstein, My 2C.
2. By day we write about Six Funds to Buy now. By night, we invest in sensible index funds. Unfortunately, pro-index fund stories don’t sell magazines.
I guess a lot of money, especially from pension funds and sovereign wealth funds and such, goes into ETF which track the index. These funds would be in trillions of dollars, and be invested from a long term perspective (By long term I would mean 10 years+ outlook) While YOY returns would matter, they would rather look at a decent performance, rather than outstanding or volatile returns. (Can a billion dollar+ portfolio give 20%+ return consistently YOY? Don't have the no's for this, but think it is difficult. One Paulson, does not a summer make) But you are right, pro-index funds don't sell magazines, and the retail crowd would not be interested. (I wonder how many TJites would invest in such)
3. Statisticians will tell you that you need 20 years worth of data that’s right, two full decades to draw statistically meaningful conclusions. Anything less, they say, and you have little to hang your hat on. But here’s the problem for fund investors: After 20 successful years of managing a mutual fund, most managers are ready to retire. In fact, only 22 U.S. stock funds have had the same manager on board for at least two decades.
In my view, and by the same analogy, one would have to look at Sachin Tendulkar's statistics for 20 years to draw a conclusion that he is a world class batsman.
and by the time one starts betting on him, his performance would be on the decline, due to age. The criteria I would use is to judge by the returns provided by funds (if investing in stocks) 1. Outperform the market 2. Are consistent in nature. (look for Sharpe ratio here) 3. Perform well in a sideways or a down market. (The last one is the key. If long only, would it not better to withdraw the funds and place them in a FD or inverse ETF?)
2. By day we write about Six Funds to Buy now. By night, we invest in sensible index funds. Unfortunately, pro-index fund stories don’t sell magazines.
I guess a lot of money, especially from pension funds and sovereign wealth funds and such, goes into ETF which track the index. These funds would be in trillions of dollars, and be invested from a long term perspective (By long term I would mean 10 years+ outlook) While YOY returns would matter, they would rather look at a decent performance, rather than outstanding or volatile returns. (Can a billion dollar+ portfolio give 20%+ return consistently YOY? Don't have the no's for this, but think it is difficult. One Paulson, does not a summer make) But you are right, pro-index funds don't sell magazines, and the retail crowd would not be interested. (I wonder how many TJites would invest in such)
3. Statisticians will tell you that you need 20 years worth of data that’s right, two full decades to draw statistically meaningful conclusions. Anything less, they say, and you have little to hang your hat on. But here’s the problem for fund investors: After 20 successful years of managing a mutual fund, most managers are ready to retire. In fact, only 22 U.S. stock funds have had the same manager on board for at least two decades.
In my view, and by the same analogy, one would have to look at Sachin Tendulkar's statistics for 20 years to draw a conclusion that he is a world class batsman.
and by the time one starts betting on him, his performance would be on the decline, due to age. The criteria I would use is to judge by the returns provided by funds (if investing in stocks) 1. Outperform the market 2. Are consistent in nature. (look for Sharpe ratio here) 3. Perform well in a sideways or a down market. (The last one is the key. If long only, would it not better to withdraw the funds and place them in a FD or inverse ETF?) 
What is your view on Hinduja Global Solutions and Tata Steel?
Tata Steel, I will give you a tip. All things apart if you want to see very long horizon. Basic industry companies are tied to inflation. Very cyclic in nature. Wait for it.
Il try to post more frequently to the best of my ability again.
had'nt seen any buy call from u yet, but many 'do not buy 'calls u mean theres no good stock in indian mkt,
Jst joking, dont tke it srsly
u mean theres no good stock in indian mkt,Jst joking, dont tke it srsly
There are many things I dont like and never really things that I do like. I dont like to gamble with my money, Mushkil se kamaya hai so why not wait for the perfect opportunty to invest it in.
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