Value Investing

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JCD
Posts: 139
Joined: Sat Jul 20, 2019 9:12 am

Re: Value Investing

Post by JCD »

@ EMH/MPT fans:

I think there is something valuable in being challenged by believers in other systems, but I find the EMH/MPT group misses much of their own theory.  For instance, 10 reasonably diverse bets is nearly equally diversified risk wise to owning the whole market: https://www.investopedia.com/articles/s ... cation.asp .  If anything, MPT would say having bets outside of stocks/bonds is more valuable than to argue what method of stock picking you use.  

Of course for just the stock portion, some might argue a more ideal portfolio might be to use multiple forms of stock picking (E.g. Trend following, special sits, etc.) and by that point maybe an index is "best".  However, that is missing the point data the EMH believer believes in.  All value stocks are fairly valued per EMH, so picking any value stock is just as reasonable as picking all stocks.  Thus the only reasons to be concerned are volatility and diversifiable risk.  If you only have say 40% of your portfolio in stocks because of MPT, then who cares about the method of picking as long as it is reasonably diversified?  It seems to be a poorly thought out position to say a .4 * +/-2% (or +/-.8%) difference in std dev of portfolio returns is the high priority factor in returns. In other words, the difference in ETF fees vs buy and hold of 10 diverse value stocks might make the debate near nil.  A hill no one should want to die on for a long term portfolio.  You might argue if you have a 60 or 80+% stock portfolio the difference is large enough to start to matter, but that is getting into portfolio construction.  Meaning MPT is more important than EMH arguments for this discussion, but that is not the main topic of this thread, so once that caveat is mentioned, what more is there to say on it?  In other words, if you size your value investing bets well relative to your overall portfolio, there is little to concern the theory would point out, be it upside or downside risk wise.  Or am I missing something?
frommi wrote:
Tue Apr 05, 2022 1:05 am
What is an american business with 10 million $ cash in the bank, 0 employees, 0 liabilities and and 1 million shares outstanding worth per share? What is the true value? Why can i sometimes buy similar businesses for 50% of that value in the market?
How did the business get the cash?  I assume from the 0 liabilities you are saying it will never owe taxes on that cash, but that largely varies by structure.  REITs owe no taxes, but the shareholders pay taxes on the legally required dividends, thus a discount might exist for that.  That is the point of the "How" it got the cash, the structure of the business matters.  Then the second question is what is management like for this 0 employee company?  Management might choose to make a real company or invest the money or buy lotto tickets.  Maybe build a golf course right next to the CEO's house using leverage.  As to the second question, maybe because the CEO is building a golf course next to his house and the board is a bunch of worthless spineless yes men. All of this is just straight valuation, but many other questions might exist outside of traditional valuation, like what alternative investments do I have? What alternative investments does the world have? Do not forget the market dislocation in the famous line, "My kingdom for a horse!" Marketplace preferences matter and depending on the speed of a catalyst is an important aspect that traditional valuation misses. There are lots of other risks, too many for me to list, like who is the investor? A Russian today might value that 10 million in cash a lot less than an American would, given banking system limitations/sanctions. So while it seems straight forward to value, there are lots of questions to be asked.

frommi
Posts: 121
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Re: Value Investing

Post by frommi »

JCD wrote:
Tue Apr 05, 2022 3:57 am
How did the business get the cash?  I assume from the 0 liabilities you are saying it will never owe taxes on that cash, but that largely varies by structure.  REITs owe no taxes, but the shareholders pay taxes on the legally required dividends, thus a discount might exist for that.  That is the point of the "How" it got the cash, the structure of the business matters.  Then the second question is what is management like for this 0 employee company?  Management might choose to make a real company or invest the money or buy lotto tickets.  Maybe build a golf course right next to the CEO's house using leverage.  As to the second question, maybe because the CEO is building a golf course next to his house and the board is a bunch of worthless spineless yes men. All of this is just straight valuation, but many other questions might exist outside of traditional valuation, like what alternative investments do I have? What alternative investments does the world have? Do not forget the market dislocation in the famous line, "My kingdom for a horse!" Marketplace preferences matter and depending on the speed of a catalyst is an important aspect that traditional valuation misses. There are lots of other risks, too many for me to list, like who is the investor? A Russian today might value that 10 million in cash a lot less than an American would, given banking system limitations/sanctions. So while it seems straight forward to value, there are lots of questions to be asked.
No it doesnt matter how the company got that cash (at least if it was a legal way). If you own enough of a company in america you control it and can liquidate it. All that cash is yours minus the liquidation cost. I stated 0 employees and 0 liabilities for a reason :D . But of course in reality every company has at least one and that means liquidation costs will be higher. But its a thought experiment on valuation that gets you on the right track. These are the dollar bills that you can buy for 50 cents that Ben Graham has talked about 80 years ago.
And it still works today. I currently have 6 companies in my portfolio that match this type of investment.

JCD
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Re: Value Investing

Post by JCD »

frommi wrote:
Tue Apr 05, 2022 6:42 am
No it doesnt matter how the company got that cash (at least if it was a legal way).
Ownership in a structure does not mean you can can avoid what the law requires from the previous source of money:
"[A REIT must] Pay at least 90% of its taxable income in the form of shareholder dividends each year" - https://www.reit.com/what-reit

If that 10 M was income in a REIT structure it must dividend it out. The tax implications follow from that.
frommi wrote:
Tue Apr 05, 2022 6:42 am
If you own enough of a company in america you control it and can liquidate it.
What is the float of the company (not number of shares)? If it only had 40% free float you can never control it. Or what if it is like Facebook/Meta where you can own 100% of one class of share and still not have control because a different class of shares controls. Or take Baba with a totally different structure which as a American holding the company you own shares of what effectively is a contract, not the actual direct company, etc. etc. etc.

I agree in the general principles you are stating, I'm just saying in practice it is a bit more fuzzy and to be reductionist is to miss some important flavor. In the cases you personally own, it maybe you're 100% correct, but those cases created assumptions on your part about how things always play out. Hidden assumptions can cause nasty surprises, so my assertion is it is good to uncover them when you can.

steveo73
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Re: Value Investing

Post by steveo73 »

@JCD - your post was really good.
JCD wrote:
Tue Apr 05, 2022 3:57 am
If anything, MPT would say having bets outside of stocks/bonds is more valuable than to argue what method of stock picking you use.
Agreed.

You also need to clarify this point. What is the benefit of picking stocks versus investing in an index or picking commodities versus investing in an index or bonds or whatever. If you look at your portfolio how much will your outperform and an even better question is how realistic is it that you will outperform ? I suggest you should be realistic and if you are you will probably under perform. What is the realistic benefit of stock picking ? There is a cost to this as well. You are less diversified and there are other issues (the long term benefit of holding an index is stated below).

You are right though and your point highlights several issues that I see when it comes to discussing these topics on this forum.

My take is people have this approach of getting right into the detail and declaring they've created a perfect system and it's way too detail orientated. They don't take a step back and think through what they are trying to achieve and they don't have realistic expectations or a broad picture.

Another way I'd phrase this is there are two questions to ask yourself:-

1. How diversified are you across asset classes ?
2. How diversified are you within asset classes ?
JCD wrote:
Tue Apr 05, 2022 3:57 am
All value stocks are fairly valued per EMH, so picking any value stock is just as reasonable as picking all stocks. 
To me this is an extremely poor argument. It misses key points. I get it and it could also be okay. The problem is it's not optimal especially over the long term.

So today and for the next 5 years you are correct. At that point though that 5 stock portfolio is all out of whack and you need to re-balance. There can be tax implications in that re-balancing. So then you may choose not to re-balance because you are going to lose money. Then another 5 years later and your portfolio is a crazy mess.

The problem is not thinking long term.
JCD wrote:
Tue Apr 05, 2022 3:57 am
Thus the only reasons to be concerned are volatility and diversifiable risk. 
You are making good points but you've missed the long term effects.

Here is the thing you should (this includes me) state your goal and to understand your bias and the flaws in your approach.

If you can't see the flaws in your approach that is a problem.
JCD wrote:
Tue Apr 05, 2022 3:57 am
Or am I missing something?
Yep. You are missing the reason why you build a portfolio. The idea is that your portfolio funds your spending for your life and potentially leaves money for your children or anywhere you want to leave money.
Last edited by steveo73 on Tue Apr 05, 2022 10:58 pm, edited 2 times in total.

steveo73
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Re: Value Investing

Post by steveo73 »

JCD wrote:
Tue Apr 05, 2022 11:46 am
Hidden assumptions can cause nasty surprises, so my assertion is it is good to uncover them when you can.
This would be my main point to people. It's why I think you should openly state your bias. It's why I track my expenses and my portfolio.

Data over emotions. Make those assumptions really clear.

If you are a value investor you need to face certain issues:-

1. You cannot predict the future.
2. How can you re-balance your portfolio and not lose money,
3. Are you diversified across different asset classes.
4. You aren't that smart and maybe being smart is irrelevant.

If you have the ability to face the issues with open eyes I think most options are cool. My impression though is that people who don't follow MPT have so many hidden assumptions that they fail to articulate.

If you articulate your assumptions and can talk and even just accept it then that system may work for you.

One point I'd make is do not underestimate how a portfolio that made sense 20 years ago makes no sense now.

JCD
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Re: Value Investing

Post by JCD »

steveo73 wrote:
Tue Apr 05, 2022 10:03 pm
You also need to clarify this point. What is the benefit of picking stocks versus investing in an index or picking commodities versus investing in an index or bonds or whatever. If you look at your portfolio how much will your outperform and an even better question is how realistic is it that you will outperform ? I suggest you should be realistic and if you are you will probably under perform.

As someone who thinks value investing is useful, I honestly don't think in terms of performance of a ticker, I think in terms of the value of the business.  However, to point to the theory, the standard dev is .8% a year of a portfolio with 40% stocks.  I do agree you can value bonds, but for my purposes I was only discussing stocks.  Beyond stocks (or equity), bonds, I think commodities, collectibles/art, real estate and monetary "alternatives" (metals, fx, crypto) are also relevant in a portfolio, but other than real estate, I think there is no "performance" valuation metric(*) that one can apply to those assets, as they don't perform anything.  Given that is my view, I do agree not all value investors agree to my somewhat more MPT style views.

(*) Before the crypto people descend on me, yes some crypto may provide valuable services, but then the coin may be legally defined as an equity like stocks, which is why I didn't list them separately.

As for the probability to underperform, EMH says that there is no such larger probability of underperformance, just a larger probability of volatility.  Now if you are saying I, as a flesh and blood, I will screw it up and exit when down, I think that is a worthwhile question, but a rather personal one.  I could say "Nuh-uh!" and you could shout back "Ya-huh!" and frankly that is what gives these discussions a bad name.  So unless you have mechanical-oriented (rather than surveys of actual investors), non-fund based (where firing risk is real) evidence to suggest picking 10-30 well diversified stocks will underperform, the entire argument is based upon my character/emotional control.  Having looked at a lot of evidence, I suspect you don't have such evidence, but I'm open to new data.  I agree statistically we can't all be above average at emotional control, and frankly it seems most humans are poor at it, but I don't think you can claim to evaluate any particular forum member.
steveo73 wrote:
Tue Apr 05, 2022 10:03 pm
So today and for the next 5 years you are correct. At that point though that 5 stock portfolio is all out of whack and you need to re-balance. There can be tax implications in that re-balancing. So then you may choose not to re-balance because you are going to lose money. Then another 5 years later and your portfolio is a crazy mess.

The problem is not thinking long term.

While this could change, US federally speaking, the first 40 or 80k of long term capital gains is 0.  For someone who believes in ERE(*), if you are exceeding 40-80k in a rebalance, you are doing it wrong.  Now there are those who believe in letting your winners ride.  These are what some value people call "compounder bros".  Those folks think it is best to weed out the losers rather than to "pull the flowers".  In such a case, you may be right, there may be tax implications and in 10 years your portfolio will be controlled by 1-2 companies.  That is considered normal by those folks and they think that is just how it should be done.  I'm not from that camp, but I do understand why you'd be in that camp.  Outside the US, rebalancing and tax implications should be part of your investing plan.  For that matter, ETFs/indexes might not be nearly as well treated outside the US as they are in the US, so I'm not even sure if the issues you raise applies or not.

(*) 33 years x 25k = 825k * 40% stock = 330k.  If that grew 20%, you could rebalance more than the entire growth of that portion of the portfolio.  
steveo73 wrote:
Tue Apr 05, 2022 10:03 pm
Yep. You are missing the reason why you build a portfolio. The idea is that your portfolio funds your spending for your life and potentially leaves money for your children or anywhere you want to leave money.

Did I?  I mean you stated why you or those you imagine build a portfolio and assume I have the same reasons.  Buffet does it so he can tap dance to work every day.  I think that your assumption is we all look at things the same way and do them for the same reasons.
steveo73 wrote:
Tue Apr 05, 2022 10:15 pm
1. You cannot predict the future.

You or someone else will post to this topic after me.  See I just made a prediction, we'll see if it comes true. :)  I think the question isn't if you can predict, but if you can state some level of confidence.  For example, the network effect of Google is relatively strong, so earnings are likely to grow overtime.  Here is a range of possible outcomes based upon what the market thinks about x, y, z....  It is not just assuming I'm smarter than the market, but that some outcomes are more probable than others.  The market balances many possible outcomes, but sometimes the market is clearly crazily obsessed about one aspect, ignoring other possible outcomes.  The poster child of this is the GameStop chart.  And by making a bunch of those bets, you hope that some of them will work out.  Of course the indexer also cannot know if the entire market will work out.  See Japan for over 30 years.  So to the degree no one can know the future, indexer or value investor, you'll hear no argument from me. 

The question is can we ever say anything is more likely than not valuable relative to the alternatives in the future?  This applies to you wearing warm clothing in the winter, putting on a safety belt or you deciding to invest in a bike as much as the stock market.  If you think you cannot ever predict the value of anything, then choosing whatever the collective decides (e.g. I wear warm clothing because my tribe does) seems fine, but rather anti-ERE (which in general is against consuming without thought of the consequences, which is a form of predicting the future).  Still, I hear the objection, I'm not saying you can't predict, I'm claiming you can't do it better than the crowd can.  I totally understand the theory, I understand how it works and I do understand the data backing it.  Yet, that seems anti-ERE: Why not keep consuming 3 planets worth of resources--the crowd says it is fine?  If you conclude there are times the crowd is wrong and you can identify them (otherwise why are you on this site?), then you conclude that indexing is not always the right method.  If you do conclude there are possible reasons to not index, then you can start to think through what they are or when they are.  I also know times when following the index was a less optimal strategy and I know some of the systemic risks involved in the index.  The old refrain that no one can predict is not invalid, but it just isn't the point.

One last question point: Do you believe it is ever rational to start a business?  I mean that is the most concentrated equity portfolio you can imagine.  If you say no, then why should an index ever exist, since no companies could be formed.  If you say yes, then doesn't that imply someone can predict the future?  If you say yes, but it is totally luck oriented, does that imply that no matter how badly or smartly I organize the business, no matter my skill, the business success is totally random?  So ultimately it seems like to me the only logical conclusion looks a bit like what Marx suggests with the Buffet caveat: A capitalist early in a new industry will gain super-profits until competition can come in, unless a moat exists.  Thus an early investor who can identify the moat or the new industry is likely to gain super-profits.  Later competitors who can breach the moat will gain normal profits.  Then one last question to ask, do you think the market can ever fail and if so, can anyone ever predict that failure?  If you say no, I think there is a small band of short sellers you might talk with.  If you say yes, then indexing is not always the answer.
steveo73 wrote:
Tue Apr 05, 2022 10:15 pm
Are you diversified across different asset classes.
I think I was pretty clear in describing how value investing can be one part of a well diversified set of assets.  Does everyone follow that theory?  No, but that is what makes a market. Since this is on value investing and not portfolio construction, going into asset picking here seems a bit irrelevant other than to say it should be considered.

frommi
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Re: Value Investing

Post by frommi »

steveo73 wrote:
Tue Apr 05, 2022 10:15 pm
Data over emotions. Make those assumptions really clear.
Just to give you a small taste how value investing can work:
YTD returns:
SPY: -6.52%
IWM: -11.2%
TLT: -11.6%
GLD: +6.73%
my portfolio (100% value stocks, no cash, no gold stocks): +7%

Now you can say this was all luck, but i would argue its just mean reversion. Why should i ever diworsify?

JCD
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Re: Value Investing

Post by JCD »

Hey look, I made a prediction and it came true! :) @frommi Your check is in the mail. 

I think the problem with citing 1 year returns or even returns at all is there is just a luck denial attack.  I mean this argument was addressed back in the 1980s: https://www8.gsb.columbia.edu/articles/ ... rinvestors and effectively ignored.  It is an impossible argument to "win" so don't try.  The point I think that is worth attacking is that the assumption that the market is always efficient or in effect, right based upon the limits of knowledge.  The implications and near religious faith around markets then can be examined.  That is to say, even if you can't prove your performance is not luck, you can prove if markets are ever inefficient.  Basically using Karl Popper's falsification principle to attack the idea logically rather than empirically.  Empirically it should be noted EMH does a pretty good job in the lab.  So the question is, are there ever times of inefficiencies outside the lab setting you can point to? 

I'd point to Gamestop/AMC, the GFC crash, the .com bubble, negative/50 dollar oil, etc. as cases where it could be known there were legitimate issues in valuation and/or risks that go beyond the reasonable man's investing thesis.  If these are legitimate cases where EMH does not work then there is some chance you can beat the markets and thus the question is when, not if.  That then goes back to value investing and if it is a valid method and when it is a valid method?   In many cases I cited above it seems superstructure has an impact, both on the upside and downside.  Thus the question I would ask is can valuation be useful for dealing with structural market issues?  You might ask different questions on different styles of market dislocation, but that is part of what makes a market--different insights.

steveo73
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Re: Value Investing

Post by steveo73 »

JCD wrote:
Thu Apr 07, 2022 11:36 am
It is an impossible argument to "win" so don't try. 
@frommi - this is correct. With all due respect but anyone who says they beat the market in one year is kidding themselves. You have to look at the returns over the course of your investing life. Your value stocks aren't going up like that consistently over time. You are going to revert to the mean and you've taken on specific stock risk.

I'll explain the big flaw in your approach but I'm repeating myself.

Let's say you go all into stock A. It works great for 10 years and the price doubles in real terms. You've made 100k dollars returns. The stock at that point is overvalued and it's going down relatively for the next 10 years. So you get out. You sell the stock but what happens is that your 100k returns get taxed and you end up with 80k returns.

I can't comment on people's individual tax situations but this is definitely the case with me. I have to sell my index funds and suffer the same tax implications but I can sell less and I only have to sell to fund my living expenses. This means I can sell less.

It makes my portfolio clean.

I do hold individual stocks as well. I worked for a big bank and myself and my wife have been gifted say 8% of our total portfolio in an individual stock. I'm not selling this stock until I need too and I won't rebalance but it's a messy part of my portfolio.

I'll add that the bigger your portfolio the more of an issue that this becomes.
Last edited by steveo73 on Thu Apr 14, 2022 6:35 pm, edited 1 time in total.

steveo73
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Re: Value Investing

Post by steveo73 »

JCD wrote:
Thu Apr 07, 2022 11:36 am
The point I think that is worth attacking is that the assumption that the market is always efficient or in effect, right based upon the limits of knowledge.  The implications and near religious faith around markets then can be examined.  That is to say, even if you can't prove your performance is not luck, you can prove if markets are ever inefficient. 
I think you are setting up your own argument here. I don't believe markets are always efficient. I believe people can make money hand over foot. I've been mentored by a highly successful investor who has a lot of money.

I still would much prefer using index funds.

frommi
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Re: Value Investing

Post by frommi »

steveo73 wrote:
Thu Apr 14, 2022 6:34 pm
I think you are setting up your own argument here. I don't believe markets are always efficient. I believe people can make money hand over foot. I've been mentored by a highly successful investor who has a lot of money.

I still would much prefer using index funds.
And thats fine, just do what works for you. 9 years ago i tried index funds and MPT and followed the PP. I couldnt stand the volatility, because i didnt know what i really own!
Since than i read lots of books and do the value investing approach which i am at peace with. Yes i do buy cheap and sell expensive and yes i pay taxes on my way. But it works for ME. I dont even care if i beat the market (which i still do over the past 5 years, even though its close) because i am at peace with my approach. And the returns i posted were even more hillarious because that was not one year, but just the last 3 months. Value investing was out of favor for the past 10 years and is just now making a comeback.

Humanofearth
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Re: Value Investing

Post by Humanofearth »

We can remove capital gains taxes from value investing as those are highly dependent on your residency and where your assets are, except for US and Eritrea citizens. Anybody can leave US and renounce or formally leave any tax net for another’s. Foreigners holding US stocks in a US brokerage don’t owe capital gains taxes so you don’t have to change a thing about your investments to renounce. Holding something for tax reasons is foolish. Maximize gains and life quality. Get the most value of life.

steveo73
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Re: Value Investing

Post by steveo73 »

frommi wrote:
Fri Apr 15, 2022 2:02 am
And thats fine, just do what works for you. 9 years ago i tried index funds and MPT and followed the PP. I couldnt stand the volatility, because i didnt know what i really own!
Since than i read lots of books and do the value investing approach which i am at peace with. Yes i do buy cheap and sell expensive and yes i pay taxes on my way. But it works for ME. I dont even care if i beat the market (which i still do over the past 5 years, even though its close) because i am at peace with my approach. And the returns i posted were even more hillarious because that was not one year, but just the last 3 months. Value investing was out of favor for the past 10 years and is just now making a comeback.
Good post. One thing I completely agree with is that you need to feel comfortable with your approach. Although I am a massive fan of MPT I don't like portfolios with gold in them. It's a personal call. If you are saving you are a step ahead.

One thing I reckon is really important is don't lose money.

steveo73
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Re: Value Investing

Post by steveo73 »

Humanofearth wrote:
Fri Apr 15, 2022 9:03 am
We can remove capital gains taxes from value investing as those are highly dependent on your residency and where your assets are, except for US and Eritrea citizens. Anybody can leave US and renounce or formally leave any tax net for another’s. Foreigners holding US stocks in a US brokerage don’t owe capital gains taxes so you don’t have to change a thing about your investments to renounce. Holding something for tax reasons is foolish. Maximize gains and life quality. Get the most value of life.
I don't really agree with this because you can't just wave your hand and ignore capital gains tax.

I do agree that you shouldn't do things just for tax purposes but that isn't my argument.

Just say I have 100 million dollars in property and if I sell those properties I'll be taxed 40 million dollars. Do you do it ? What if at the start of developing that portfolio you instead invested in index funds ? That property portfolio may also have a terrible yield that doesn't provide a lot of money to live off. So you also end up with a lot of debt to for instance renovate your properties. This is not an unrealistic scenario because I've seen it.

The difference is when you sell you will still cop capital gains tax but you are selling to fund your lifestyle rather than rebalance your portfolio.

Humanofearth
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Re: Value Investing

Post by Humanofearth »

steveo73 wrote:
Fri Apr 15, 2022 7:43 pm
if I sell those properties I'll be taxed
My point is that it’s not relevant as most humans on earth can legally have 0% capital gains taxes with any stocks. I pay 0 and know many people who pay 0, sales or property taxes aren’t 0 for us though.

If any human without Eritrea or US citizenships invests in US stocks, no capital gains taxes, as long as they don’t live in US or have US residency. Why hold if the only reason is taxes when that can be 0 but other factors are relevant to all holders. This forum isn’t US citizen specific.

If any human enters a legal contract in which they shall control a patch of soil, they’ll expect to be protected by the local monopoly on violence and will pay taxes for this protection during the holding period and selling events, regardless of other factors. Most countries have property taxes. Property taxes are common whereas capital gains taxes are easier to legally remove.

US citizens can also use a Roth, etc.

Tldr; capital gains taxes are rarer and more easily negated than property taxes.

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conwy
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Re: Value Investing

Post by conwy »

frommi wrote:
Mon Apr 04, 2022 8:49 am
Ask japanese investors how good it was to invest in the market in 1990 at absurdly high prices. But of course they just took the market risk. :D
Not so bad if they had tilted to small value, even just Japan small value!

frommi
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Re: Value Investing

Post by frommi »

conwy wrote:
Sat Apr 16, 2022 9:58 am
Not so bad if they had tilted to small value, even just Japan small value!
I know. Ive seen studies of deep value strategies that performed with a CAGR of 15-20% during 1990->2005 in japan.
Found a summary of it: https://alphaarchitect.com/2019/10/an-a ... tstanding/

Douglas
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Re: Value Investing

Post by Douglas »

I'm a wanna be value investor, I mostly think it is good fun and massive learning opportunity. I just recently got into picking individual stocks, I was too afraid before our liquid assets got to ~10x living expenses and the mortgage was paid off. Right now I am actively investing about 5% of investible assets (rest of portfolio is ETF type investments), most of that still in cash ready to pull the trigger when some sort of limit is reached. I don't expect to beat the market, but I do think it is somewhat interesting and fun and I hope to not be too far behind!

I'm almost exclusively investing in companies that are in my field / profession. The field is very large and complex so I'm always learning something. My investing right now is more emotional (investing in competitors, investing in vendors of the company I work for, investing because I think the technology is cool or its a small cap startup) but I am moving towards being more disciplined.

I'm reading more annual reports, trying to find smaller companies, look at supply chains, customers. Its all really slow, taken me years to get to this point. The time investment is real but once you get the mechanics of trading down and organizing systems started you can just keep improving them over time.

So to the OP, just allocate a small portion of your investible assets to actively manage and have fun!

alex123711
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Re: Value Investing

Post by alex123711 »

Douglas wrote:
Fri Jul 01, 2022 9:45 am
I'm a wanna be value investor, I mostly think it is good fun and massive learning opportunity. I just recently got into picking individual stocks, I was too afraid before our liquid assets got to ~10x living expenses and the mortgage was paid off. Right now I am actively investing about 5% of investible assets (rest of portfolio is ETF type investments), most of that still in cash ready to pull the trigger when some sort of limit is reached. I don't expect to beat the market, but I do think it is somewhat interesting and fun and I hope to not be too far behind!

I'm almost exclusively investing in companies that are in my field / profession. The field is very large and complex so I'm always learning something. My investing right now is more emotional (investing in competitors, investing in vendors of the company I work for, investing because I think the technology is cool or its a small cap startup) but I am moving towards being more disciplined.

I'm reading more annual reports, trying to find smaller companies, look at supply chains, customers. Its all really slow, taken me years to get to this point. The time investment is real but once you get the mechanics of trading down and organizing systems started you can just keep improving them over time.

So to the OP, just allocate a small portion of your investible assets to actively manage and have fun!
I wonder if all the learning is worth it though, I have been doing it for years and investing a portion in value. However the skills aren't really tangible/ transferrable compared to learning to program, learning a language, or studying to be a dr etc. But then again lots of people have hobbies that aren't exactly productive?

Douglas
Posts: 80
Joined: Fri Feb 10, 2017 11:36 am

Re: Value Investing

Post by Douglas »

alex123711 wrote:
Thu Aug 18, 2022 8:55 am
I wonder if all the learning is worth it though, I have been doing it for years and investing a portion in value. However the skills aren't really tangible/ transferrable compared to learning to program, learning a language, or studying to be a dr etc. But then again lots of people have hobbies that aren't exactly productive?

hey Alex, I've logged back on after a long hiatus. I've actually mostly given up on active investing, I do just enough to keep me entertained and even then it is very small. I tried to focus on companies within my industry but even then I quickly got over my head. At the end of the day it is just easier to put the money into index funds and spend your precious time on things that are more enjoyable, such as going outdoors on an adventure.

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