Valuewalk.com
0
All posts from Valuewalk.com
Valuewalk.com in Valuewalk.com,

Excess Returns: Process Mistakes [Part I]

Excess Returns: Process Mistakes - Part I by Frederik Vanhaverbeke, author of Excess Returns: A Comparative Study of the Methods of the World’s Greatest Investors

"Using a stop loss is like buying a house for $1 million and telling your broker to sell when he/she gets a bid for $800,000."

In my book Excess Returns: A Comparative Study of the Methods of the World’s Greatest Investors, I describe in detail how dozens of very successful investors managed to beat the market by impressive margins over the past decades. The book explains the surprising similarities in the approach of these top stock pickers in all the steps of the investment process. In this and a second article, I briefly describe two common process mistakes from my book that top investors unanimously blame for why so many investors fail to beat the market.

Too many people invest in the stock market without a clearly articulated investment approach. They don’t know what they are looking for. Their buying and selling approach is erratic and inconsistent. And they take their cues from gut feeling, rumors, and the latest headline in the financial media rather than from rational considerations. Another major problem is that numerous people who fancy themselves investors incorporate elements of trading in their investment approach. One moment they are looking for bargain-priced stocks with strong competitive moats. And at another moment, they buy and sell based on price...


More