Joe | Financially Savvy

Joe | Financially Savvy



The Intelligent Investor: 10 lessons to help you become a better investor // THREAD

1. Process, process, process! Investors need a sound intellectual framework for making decisions, as well as the ability to prevent their emotions from getting in the way of it It's something I emphasise a lot in @TheStockGroup, it means...

@TheStockGroup You need to find a strategy that works for you, your own goals, your time horizon and risk appetite Write all of these things down. Whenever you're about to buy or sell, refer back to this If that move isn't aligned with what you wrote, you're likely acting on emotion

@TheStockGroup 2. Market behavior The more volatile and bearish the market’s behavior, the greater the opportunity for the disciplined investor Another point I preach often - short term price volatility is the price we pay for superior returns pver the long term Case in point...

@TheStockGroup If you used a time machine to travel back and invest in the 20 best-performing stocks of the last 15 years Your portfolio would suffer multiple 40% declines Some stocks would fall as much as 70% But you would have achieved a 29% annualized return. Buy high conviction & hold!

@TheStockGroup 3. Value & price The future value of every investment is a function of its present price. The higher the price you pay, the lower your return will be. It's often a balance between wanting to get a great business at a superb price, and having to pay a premium for quality...

@TheStockGroup Some stocks may never seem 'cheap' based on today's sales But if you can see where the business is going to be in 5 - 10 years from now and it looks more prosperous Then you should buy & hold. Buffett missed out on $billions not buying Walmart cos it was an 'expensive' stock

@TheStockGroup 4. Margin of safety No matter how careful you are or how disciplined your process, the one risk you can't eliminate is the risk of being wrong To mitigate this risk, Graham speaks of the 'margin of safety' – never overpaying, no matter how exciting the stock may appear to be

@TheStockGroup 5. Your worst enemy As an investor, it's not the market or short sellers you need to worry about It's yourself and your emotions We emotional beings who make emotionally charged decisions every day Recognizing this is the first step - See lesson 1 for the next

@TheStockGroup 6. Future projections Mathematical valuations which depend on anticipating the future are more vulnerable to possible miscalculation and serious error than those tied to a figure demonstrated by past performance Unfortunately...

@TheStockGroup A significant part of the value of a ‘high-multiplier’ stock is derived from future projections And except for the growth rate itself, these differ greatly from past performance You must have confidence in your numbers and the ability of management to achieve them

@TheStockGroup 7. Bargain issues Can you really make money in ‘bargain issues’ without taking a serious risk? Yes, if you can find enough of them to make a diversified group and don’t lose patience if they fail to advance quickly Often, the patience needed is considerable!

@TheStockGroup 8. Contrarian thinking The intelligent investor understands a stock becomes riskier as its price rises and less risky as its price falls In addition, since it makes stocks more costly to buy, you should dread a bull market And...

@TheStockGroup So long as you keep enough cash to hand to meet your spending needs You should welcome a bear market This is because it puts stocks back ‘on sale’ and grants you the opportunity to buy great businesses at even better prices! This is an opportunity present now in many cases

@TheStockGroup 9. Look beyond yield Stocks do well or poorly in the future because the businesses behind them do well or poorly No other reason As such, no matter how desperate they might be for income, no intelligent investor would ever buy a stock on the basis of its dividend yield alone..

@TheStockGroup There are many aspects to consider when selecting a dividend stocks for it's yield But essentially, the company’s underlying business must be solid and its share price must be reasonable.

@TheStockGroup 10. Sources of undervaluation There are 2 principal reasons why the wider market will undervalue a stock - Currently disappointing results - And protracted neglect or unpopularity You should look for...

@TheStockGroup Reasonable stability of earnings over the past decade or more … plus sufficient size and financial strength to meet possible setbacks in the future Such considerations form a significant part of my own investment process which I teach in @TheStockGroup Cont...

@TheStockGroup If you found this helpful, please: - Retweet the original tweet - Follow @FiSavvy Also, see the below tweet for the step-by-step research process I follow to find winning stocks

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