Tutorial 56-60 Recap
1) MR. MARKET - the idea of Mr Market was coined by Benjamin Graham to describe an emotional character that offers to trade his stocks every day at different prices depending on the mood he is in. The Investment Masters understand the market can be irrational and is subject to mood swings by the crowd. The price signals and bids and offers by Mr Market are not necessarily reflective of a company's worth. The Investment Masters seek to take advantage of Mr Markets wild mood swings to buy securities below what they are fundamentally worth.
2) INVESTMENT COMMITTEES - Investment committees have a poor track record of success. The world's greatest investor has no investment committee. Ultimately the more people with input into a decision the more likely the investment decisions are sub-optimal and at risk from groupthink.
3) HUMAN NATURE - the Investment Masters recognise that human nature doesn't change and continues to provide opportunities for skilful investors who are aware of human biases and their impact on investment decisions.
4) WHAT YOU KNOW? - The Investment Masters understand it is more important to acknowledge what you don't know as opposed to what you know. Recognising what you don't know can help identify the risk factors in an investment position and keep you out of a position you might otherwise have invested in. Always ask yourself what don't you know.
5) HATE - Investment Masters often look for stocks that are generally hated rather than those that are loved. When stocks are hated they are more likely to be mispriced and the bad news may already be reflected in the price.