Sunday, 24 November 2013

Four Investing Rules for bulls , bears and sheep .

The main four investing rules are as follows ;

The first is that uncertainty, in valuation and investing, is a feature and not a bug. It may make
you uncomfortable but it is also the reason that you earn risk premiums. Put differently, if
you want the absolute comfort that comes with certainty, then you should be willing to
settle for the risk free rate as your return.

 The second is that the most common responses
to uncertainty, which include denial, paralysis, outsourcing, herding and rules of thumb,
all too often lead to bad conclusions.

 The third is that you can still value companies in the
face of large uncertainties, if you keep your valuations simple and internally consistent,
though you should not expect precision in your final valuation. In fact, the best
opportunities for investing are often in companies where the uncertainties are

 The fourth and final point is that the uncertainty you feel about your estimate of
value is augmented by the risk that the market price will not adjust to that value, even if
you are right in your assessment. That uncertainty can be mitigated by building in a
margin of safety into your investment decisions, having a longer time horizon or looking
for price catalysts, but it cannot be eliminated.

A sombre list indeed .But take heart those affable blog readers of mine .
We are about to become richer by using the uncertainty method to our advantage and of course a little inside information goes a long way . When A pays up , into B . Which I will advise soon .
Keeping them beady eyes open and ready for the read of a lifetime , when I get round to doing my new charts of the future and 2030 exposed .

Happy investing and may your Prophet go with you

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