This is the concluding post on the Summary of the book "The Little Book of Value Investing" by Chris Browne.
Previous parts can be found here. Part 1 Part2 Part 3 Part 4Part 5
Chapter 20: Why do people not follow value investing principles[/b]? - Most people lack the temperament to invest against the crowd. Read more about Behavioral finance.
- Herd instinct. People feel confident when investing with the crowd.
- Reputational and career risk of being a contrarian.
- People cannot stand the inevitable periods of underperformance when following value investing.
- Courage is needed to buy out of favor companies. Often, the investments are 'boring'.
- People seek instant gratification.
- Value investors are like farmers. They plant seeds and wait for the crops to grow.
- Overconfidence is another flaw of investors.
- The investment world equates activity with intelligence.
- Good long term performance results from beating the market in bad times.
- Caution should not be seasonal. You should not be cautious when the markets are down.
- Maintaining a steady state of mind in good and bad times is the key to successful long term investing.
- Indexes can be victims of bubbles. SP500 in 1999 was 30% tech.
- Lot of pressures against value investors.
Chapter 21: Stick to your guns
- Value investing requires more effort than brains and a lot of patience.
- Growth and value are joined at the hip. Difference is a question of price.
- Track acquisitions. Use this to screen companies that are selling in the stock market at a significant discount to what an LBO group may pay. This is called the "appraisal method". 3rd approach along with P/E and P/B.
- Buying stocks for less than they are worth and selling them as they approach their true worth is at the heart of value investing.
- Buy below intrinsic value with a margin of safety, exercise patience.
- Patience is the hardest part of using the value approach.
Hope you enjoyed reading the summary. I like the ideas presented in the book and I am hoping I will refer back to this book summary atleast once a year.
Some other book summaries I have posted here are
Lessons from "The Five Rules For Successful Stock Investing" by Pat Dorsey
Lessons from "The Little Book of Behavioral Investing" by James Montier
Previous parts can be found here. Part 1 Part2 Part 3 Part 4Part 5
Chapter 20: Why do people not follow value investing principles[/b]? - Most people lack the temperament to invest against the crowd. Read more about Behavioral finance.
- Herd instinct. People feel confident when investing with the crowd.
- Reputational and career risk of being a contrarian.
- People cannot stand the inevitable periods of underperformance when following value investing.
- Courage is needed to buy out of favor companies. Often, the investments are 'boring'.
- People seek instant gratification.
- Value investors are like farmers. They plant seeds and wait for the crops to grow.
- Overconfidence is another flaw of investors.
- The investment world equates activity with intelligence.
- Good long term performance results from beating the market in bad times.
- Caution should not be seasonal. You should not be cautious when the markets are down.
- Maintaining a steady state of mind in good and bad times is the key to successful long term investing.
- Indexes can be victims of bubbles. SP500 in 1999 was 30% tech.
- Lot of pressures against value investors.
Chapter 21: Stick to your guns
- Value investing requires more effort than brains and a lot of patience.
- Growth and value are joined at the hip. Difference is a question of price.
- Track acquisitions. Use this to screen companies that are selling in the stock market at a significant discount to what an LBO group may pay. This is called the "appraisal method". 3rd approach along with P/E and P/B.
- Buying stocks for less than they are worth and selling them as they approach their true worth is at the heart of value investing.
- Buy below intrinsic value with a margin of safety, exercise patience.
- Patience is the hardest part of using the value approach.
Hope you enjoyed reading the summary. I like the ideas presented in the book and I am hoping I will refer back to this book summary atleast once a year.
Some other book summaries I have posted here are
Lessons from "The Five Rules For Successful Stock Investing" by Pat Dorsey
Lessons from "The Little Book of Behavioral Investing" by James Montier
