Temperament, decision making, risk factoring in individual investing & Finding Bargains
Issue No. #016
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Today at a Glance:
Lesson From the Book: Finding Bargains
Tweet: Temperament, decision making, risk factoring in individual investing
Quote from Morgan Housel
Snippets: Why Investing is difficult and FOMO
Finding Bargains (From the Book)
Howard Marks used the tech-stock mania as an example of the reliable process through which a good fundamental idea can be turned into an overpriced bubble. It usually starts with an objectively attractive asset. As people raise their opinion of it, they increasingly want to own it. That makes capital flow to it, and the price rises. People take the rising price as a sign of the investment’s merit, so they buy still more. Others hear about it for the first time and join in, and the upward trend takes on the appearance of an unstoppable virtuous cycle.
Bargains are created is largely the opposite. Thus to be able to find them, it’s essential that we understand what causes an asset to be out of favor. This isn’t necessarily the result of an analytical process. In fact, much of the process is anti-analytical, meaning it’s important to think about the psychological forces behind it and the changes in popularity that drive it.
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One Tweet
One Quote
"Imagine how much stuff you would have to make up if you were forced to talk 24/7. Remember this when watching financial news on TV."
- Morgan Housel
Interesting Books Snippets shared during the Week
1. When you don't understand something, Don't participate in it at the Peak of a buying frenzy. (Source)
2. Why is Investing so Difficult (Source)
3. Cash flow of Middle Class (Source)