Tutorial 16-20 Recap
1) VALUE INVESTING- The ranks of the Investment Masters are filled with Value Investors. While a number of the Investment Masters are traders [Soros, Druckenmiller, Tudor-Jones], the great majority are value investors. Over the long term Value Investing has proven itself as the most successful investment strategy. Focus on buying stocks below their intrinsic worth.
2) STOCK PRICES - Stock prices are far more volatile than the underlying earnings or underlying intrinsic value of the companies they represent. The key to long term returns is to buy stocks when their prices have diverged significantly from their intrinsic value. In general, price is not news. Focus on the underlying value offered in relation to the market price.
3) RISK - The Investment Masters see risk as the permanent loss of capital NOT volatility. This is because it is permanent losses which impede the power of compounding.
4) VOLATILITY - Volatility is welcomed by the Investment Masters as it allows them to buy companies at prices well below their intrinsic value. Market prices fluctuate far more than the prices of most things. Being able to take advantage of those low prices is one of the keys to successful investment.
5) THE VALUE OF CASH - Unlike most mutual funds who are fully invested at all times, the majority of the Investment Masters understand that having cash can allow you to take advantage of weaker markets or to protect capital in times of market overvaluation. Don't be afraid to hold cash if you can't find attractive investment opportunities.