investorpsychology
ValueWalk
The mistake that the Buy-and-Holders made in thinking that market timing is not 100 percent required for every investor is the worst mistake ever made in the history of personal finance. Market timing is price discipline. No market can function without price discipline. Take market timing out of the picture and sooner or later you are going to have a bull market. Have a bull market and you are going to have a bear market. Have a bear market and you are going to have an economic crisis, It’s all connected. Q1 2023 hedge fund letters, conferences and more Market Timing Is NecessarySo it’s worth ...
ValueWalk
I was once very popular. No – really! From May of 1999 through May of 2002, I posted on the internet only about effective saving strategies. People loved my stuff. It got to a point at which I would turn up in the morning at my favorite discussion board and say “hello” and the post would get eight recommendations! It sounds terrible for me to say it but it was getting annoying. Q4 2022 hedge fund letters, conferences and more One thing that I love about writing on discussion boards and blogs is that you obtain quick feedback on your ideas and that helps you refine them. People patting you on t...
ValueWalk
Buy-and-Hold has been a disaster. I have great respect for what the Buy-and-Holders tried to do. The reason why I was once a Buy-and-Holder myself is that I believe that investment strategies should be rooted in research. The Buy-and-Holders were the first to develop a model for understanding how stock investing works that was rooted in research. And most of the Buy-and-Hold ideas are solid stuff that have passed the test of time. I incorporated all but one of the core Buy-and-Hold principles into the Valuation-Informed Indexing model, which is intended as its replacement. Q3 2022 hedge fund l...
ValueWalk
Stock investors are emotional. Not a little bit. A lot. Today’s CAPE value is 30. The CAPE value could never reach 30 if stock investors were not crazy emotional creatures. The fair-value CAPE level is 17. So stocks are today priced at nearly two times their real value. It’s hard to let in how much harm we have done to ourselves by permitting the CAPE value to rise so high. Not by making a rational choice to do so. By following our emotions where they led us. Q2 2022 hedge fund letters, conferences and more Keeping Emotions Under ControlKeeping our emotions (and thus stock prices) under contro...
ValueWalk
Irrational exuberance is off the charts today. The CAPE value on the day I write these words is “30.” Since the fair-value CAPE value is 17, that means that nearly half of the value of the stock market is rooted in nothing more than investor emotions. People tell themselves that “I have a portfolio worth $500,000” and they don’t stop to think that the true and lasting value of that portfolio might be something between $250,000 and $300,000. So we believe. But we don’t fully believe. Q2 2022 hedge fund letters, conferences and more When Irrational Exuberance Goes PoofIf we fully believed, the i...
ValueWalk
Do you want to become a better stock investor? If you do, you’re the exception, not the rule. I have spoken with thousands of stock investors over the past 20 years in conversations with them held on the internet. I have been surprised by how few have a genuine interest in becoming better investors. Q1 2022 hedge fund letters, conferences and more Emotions About Stock InvestingThe primary emotion that most people have about stock investing is a defensive one. They don’t want to mess up. That makes people want to follow the crowd. One investor said it to me quite bluntly. I argued that, if Shil...
ValueWalk
Robert Shiller’s research brought on a “revolutionary” (this word appears in the subtitle of Shiller’s book) advance in our understanding of how stock investing works. But few people appreciate that advance. If they did , the amount of irrational exuberance (the title of Shiller’s book) present in the market price would be smaller than it had ever been before. The reality is just the opposite. We have seen more irrational exuberance in the past 25 years than at any earlier time in U.S. stock market history. We are as a people doing an amazing job of ignoring the powerful insights that Shiller ...
ValueWalk
Most people love stocks. With good reason. Q3 2021 hedge fund letters, conferences and more Positive Emotions Toward StocksThe average long-term return on U.S. stocks is 6.5 percent real. It’s the strength of that return that makes retirement a realistic possibility for most of us. Most of us understand that being able to participate in the economic growth of our nation by owning stocks is a wonderful thing and experience positive emotions about this asset class as a result. Say the word “stocks” and most of us experience warm emotions. But it is not a good idea to feel only positive emotions ...
ValueWalk
Benjamin Graham was the first Valuation-Informed Indexer. He said in the 1930s that it made sense for investors to go with a 50 percent stock allocation when prices are moderate, with a 25 percent stock allocation when prices are super high and with a 75 percent stock allocation when prices are super low. Q3 2021 hedge fund letters, conferences and more Stock ValuationsGraham, however, doubted that the majority of investors could ever find appeal in the strategy. He said: “These copybook maxims have always been easy to enunciate and difficult to follow -- because they go against that very huma...
ValueWalk
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