Thank you for this list of great articles regarding value investing. This comment is not necessarily linked only to this last article. I have been trying to be a value investor for the past three months (;P), and I'm facing some challenges. First of all, I didn't find one person I couldn't convince that value investing is the best long-term strategy. However, I'm often struggling to know if there is a bubble: Are properties in Paris a bubble? (people are still ready to pay high rents to live in Paris) Are cryptos a bubble? (there is a real intrinsic value in XPR replacing swift). Second, in a symmetric information world, if people evaluate investments the same way, there is theoretically an equilibrium "profitability/risk/liquidity(/impact)" that arises. So, to "beat the market", you might need either: an asymetric information, a better way of evaluating value, a better acceptance of risk/illiquidity/damage, luck. What do you think about it? (it might lead to more comments from me '^^)
Thanks for your comment. I think that almost no one can beat the market over a long period of time. The best way to preserve, and compound money, is to be a long-term passive index investor (https://www.nicolasbustamante.com/p/investment-and-wealth). Most people who manage money live out of generous fees without putting their own money on the line. They benefit from an asymmetry of risk while losing their customers' money. (https://www.nicolasbustamante.com/p/should-i-give-my-savings-to-a-banker). Some value investors do beat the market by buying assets when they see a discrepancy between price and value. It often occurs during a market crash when speculators panic and sell. (https://www.nicolasbustamante.com/p/beating-the-market). Unless you want to be the next Warren Buffet, the risk-adjusted return of actively managing your money is low. In my opinion, it's better to buy and hold the index while spending your time building something, working at a company, or enjoying life. This way you will end up outperforming 99% of investors without having to spend time managing your money.
Thank you for the reply. Would you consider long-term passive index investment as a value investment? Who wouldn't think about how to be the next Warren Buffet? :P Another aspect I wanted to bring (and again... maybe not the best article for this) is impact. Your investments (time or money) actually have an impact on success/value outcomes. Is it something you found information about in all your readings?
Long-term passive index investing consists of buying a broad and diversified index of big companies such as the S&P500 which is far different from value investing. The latter is about buying between 3 and 15 securities at a discount price from their intrinsic value. The first one is passive whereas the second one is active.
Are you talking about "impact investing" which is investing in so-called ethical products or companies? I have no clue regarding this topic.
If it is not to beat the market as a warren buffet and if there is a simplier, more profitable way of investing, why would you be interested in value investing in the first place?
One can be interested in understanding value investing to start an investment firm with the hope of beating the market. Chances are extremely limited but some are successful such as Seth Klarman or Howard Marks. Again, most professional investors benefit from the upside without participating in the downside so it makes sense for them to try to beat the market. It's very different when you invest your own money. Investing is also an interesting activity so one might simply enjoy the act of doing it even if returns are non-optimal.
I would also argue that learning about value investing concepts makes you a better entrepreneur and manager. The best CEOs use value investing theory to drive their company. I feel I have 100x my business understanding and thus my company-building skills by reading all books about Warren Buffet and Charlie Munger. (https://www.nicolasbustamante.com/p/the-intelligent-ceo).
Hello Nicolas,
Thank you for this list of great articles regarding value investing. This comment is not necessarily linked only to this last article. I have been trying to be a value investor for the past three months (;P), and I'm facing some challenges. First of all, I didn't find one person I couldn't convince that value investing is the best long-term strategy. However, I'm often struggling to know if there is a bubble: Are properties in Paris a bubble? (people are still ready to pay high rents to live in Paris) Are cryptos a bubble? (there is a real intrinsic value in XPR replacing swift). Second, in a symmetric information world, if people evaluate investments the same way, there is theoretically an equilibrium "profitability/risk/liquidity(/impact)" that arises. So, to "beat the market", you might need either: an asymetric information, a better way of evaluating value, a better acceptance of risk/illiquidity/damage, luck. What do you think about it? (it might lead to more comments from me '^^)
Thanks for your comment. I think that almost no one can beat the market over a long period of time. The best way to preserve, and compound money, is to be a long-term passive index investor (https://www.nicolasbustamante.com/p/investment-and-wealth). Most people who manage money live out of generous fees without putting their own money on the line. They benefit from an asymmetry of risk while losing their customers' money. (https://www.nicolasbustamante.com/p/should-i-give-my-savings-to-a-banker). Some value investors do beat the market by buying assets when they see a discrepancy between price and value. It often occurs during a market crash when speculators panic and sell. (https://www.nicolasbustamante.com/p/beating-the-market). Unless you want to be the next Warren Buffet, the risk-adjusted return of actively managing your money is low. In my opinion, it's better to buy and hold the index while spending your time building something, working at a company, or enjoying life. This way you will end up outperforming 99% of investors without having to spend time managing your money.
Thank you for the reply. Would you consider long-term passive index investment as a value investment? Who wouldn't think about how to be the next Warren Buffet? :P Another aspect I wanted to bring (and again... maybe not the best article for this) is impact. Your investments (time or money) actually have an impact on success/value outcomes. Is it something you found information about in all your readings?
Long-term passive index investing consists of buying a broad and diversified index of big companies such as the S&P500 which is far different from value investing. The latter is about buying between 3 and 15 securities at a discount price from their intrinsic value. The first one is passive whereas the second one is active.
Are you talking about "impact investing" which is investing in so-called ethical products or companies? I have no clue regarding this topic.
Yes, I was talking about impact investing.
If it is not to beat the market as a warren buffet and if there is a simplier, more profitable way of investing, why would you be interested in value investing in the first place?
One can be interested in understanding value investing to start an investment firm with the hope of beating the market. Chances are extremely limited but some are successful such as Seth Klarman or Howard Marks. Again, most professional investors benefit from the upside without participating in the downside so it makes sense for them to try to beat the market. It's very different when you invest your own money. Investing is also an interesting activity so one might simply enjoy the act of doing it even if returns are non-optimal.
I would also argue that learning about value investing concepts makes you a better entrepreneur and manager. The best CEOs use value investing theory to drive their company. I feel I have 100x my business understanding and thus my company-building skills by reading all books about Warren Buffet and Charlie Munger. (https://www.nicolasbustamante.com/p/the-intelligent-ceo).