steveo73 wrote:jacob wrote:@steveo73 - As usual, you're not even wrong.
I don't see this discussion in relation to being right and wrong. It's about taking a step back and just trying to grasp the complexity and reality of the situation that we are dealing with.
This was linked earlier in the post, and I think steveo73 would be very well served to read it... and maybe even read it a second-time for good measure:
http://www8.gsb.columbia.edu/rtfiles/cb ... tt1984.pdf
I know anecdotes are, generally, useless in the grand scheme of things but I'm going to share mine for the sake of context.
I started picking stocks back in 2008 when I was very dumb and knew very little about finance. The only piece of financial advise that ever stuck was "be greedy when others are fearful and fearful when others are greedy" (I was 18 years old at the time). I had some money from graduation, so I bought some stocks. Needless to say, I watched my holdings go on a roller-coaster ride and it got very VERY emotional! I kind of liked it, though... so I sought out everything ever written by, or about Warren Buffett. I also spent about 4 hours per day on investopedia.com until I understood every single piece of jargon about investing and finance. When Warren Buffett recommended a book: I went out and bought it and read it.
Once I read "The Intelligent Investor" all of my excitement vanished, in a good way. I learned, and knew beyond any doubt, that value investing was a tried-and-true-(and-boring) way to get rich with equity investments. Now all of my excitement and joy comes around once a year (per investment, or potential investment) when the 10-K gets released, so I can pour through the numbers and update my spreadsheets.
On this forum I notice that the people are generally VERY smart. Often, much smarter than me. This community also has the tendancy to take a concept and extrapolate it to the extremes. It's especially interesting to the topic of finance and investing, because ANY strategy breaks down completely if it is copied by a critical mass of independent actors.
So it is true that value investing would not work if the market were efficient. It is also true that value investing would not work if people were purely rational with their investing decisions. Thankfully for me, markets are not efficient and people continue (in 2016) to act more emotionally about investing than rationally. In this landscape, the linked strategy still works beautifully. It would not work if everybody tried to do it... but that is a different landscape that we are not currently a part of. If the future changes, in this regard, I will change with it.
For the past 8 years I've beaten the S&P 500 by at least 2% each year, and as much as 33% in one year. I've never been "below average". If the day comes that I cannot sustain this performance, I'll probably switch to index funds. Since I know I am capable of beating the S&P 500, I will continue to do so even though people constantly remind me that I cannot do so reliably. I wonder how many years I need to keep beating it before my performance is considered reliable?
10-K's aren't hard to read... they're just boring. Putting your emotion away before clicking "trade"
is hard, in my experience, though.
edit: formatting