Novel Investor

Compounding investing wisdom...

Charlie Munger on Change and Patience

by Jon

Charlie Munger on ChangeI’m in the middle of transcribing Charlie Munger’s unofficial Q&A session after the recent DJCO meeting. He was kind enough to stick around afterward for pictures and questions and someone was nice enough to record some of it.

Charlie shared a lot of interesting thoughts and I wanted to quickly share a bit of it here. The transcript will be available in the Library once I finish.

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Question: Charlie, do you think businesses are becoming more fragile with technology and transparency? Continue Reading…

Happy Hour: Fast or Slow

by Jon

I can google anything and get a list of results in less than a second. If I click one of those links and the site takes too long to load, I’ll likely leave before I see it. How long is too long? Two seconds.

Let that sink in.

As a site owner, this will drive you crazy trying to optimize for speed. But just based on the stats, it’s insane. Most people will not wait an extra second or two for results they want. Continue Reading…

The Many Faces of Value

by Jon

Warren Buffett commemorated the 50th anniversary of Security Analysis by writing about a few lucky investors. The accepted theory at the time was that beating an efficient market boiled down to luck.

Buffett, of course, didn’t agree with the efficient or the luck part and the “Superinvestors” was born. The efficient part has since been disproven but his article unearthed the skill of seven value investors who were adept at beating the market.

Their performance results posted in the article can be found in the table below. Continue Reading…

Happy Hour: Full-time Strategy

by Jon

The best thing I read this week is an article from Jim O’Shaughnessy on what it takes to be a successful active investor. He lays out the seven traits required for active investing.

But before he does, he covers the obstacle that gets in the way of most passive investors and why active investing is even harder. Continue Reading…

Book Review: The Laws of Wealth

by Jon

The Laws of WealthInvesting is full of potential obstacles. Most investors think that if they could just figure out what happens next, they can easily avoid the future obstacles in their path. But few investors ever realize that the biggest obstacle is themselves.

The Laws of Wealth: Psychology and the Secret to Investing Success shows investors how to get out of their own way. Through studies, stories, and humor, Dr. Daniel Crosby lays out what every investor faces at some point – sometimes often – in their investing life. Their behavior compounds mistakes rather than their money.

The book is broken into two parts. The first part of the book is dedicated to ten rules that help you manage your behavioral risk. You control what matters, trouble is opportunity, excess is never permanent, and risk is not a squiggly line are a few of the rules.

Why is it important to understand these risks? Because anything that works against you can be exploited by other investors. As Dr. Crosby explains, your disadvantage, with the right set of rules, can become an advantage. Continue Reading…

Happy Hour: Animal Spirits

by Jon

The term “animal spirits” got tossed around of late to describe the market’s performance to start the year.

John Maynard Keynes coined the term actually. Here he is:

Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits — of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.

The argument is that the current “animal spirits” is due to the election. Maybe. Or people just got tired of being pessimistic. Continue Reading…

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