To: Ex-INTCfan who wrote (148098 ) 11/28/1999 5:27:00 PM From: Duncan J Horn Respond to of 176387
INTCfan Here is a quote that mirrors your post in the book "Tilting the Odds" by Steven Halpern I would like to credit bwtidal for posting this on another board. Here is Steven Halpern's excerpt: << You can be successful in the stock market and know nothing about moving averages, oscillators, program trading, support, and resistance lines. You need not follow every stock group listed by Standard & Poor's. In the stock market, quantity is no replacement for quality. What separates investing in stocks from rolling the dice at a gambling table is the ability in the stock market to make rational long-term judgments. In the stock market, you can isolate specific trends, make an assessment of the future prospects of a product or a service or a concept. It's a game of intelligence in which you pit your knowledge and common sense against others, and if your long-term analysis is correct, you win. By limiting your focus, you will also be able to take concentrated positions that mean something in dollars and cents. Diversification may have its benefits for smaller or less sophisticated investors, but investment greatness only comes to those who are willing to go out on a limb in a meaningful way? The most important factor to allow you to let the market's underlying simplicity shine through is to understand the importance of viewing stocks as operating businesses. Speculators view stocks as pieces of paper that are purchased for the sake of finding someone else at a future time willing to pay more. An investor, on the other hand, buys a stock to benefit from owning a stake in a business. Lynch notes that his biggest profits always came during the third, fourth, or fifth year of owning a stock. Buffett views stock ownership in the same manner as buying the entire company. If he wouldn't want to own the entire business, he isn't interested in participating in any of its shares. Speculators, on the other hand, benefit from the "greater fool" theory of investing. Seen today in the form of momentum investing, the theory is that a stock's absolute value is irrelevant. The purpose of owning the stock is simply because it is expected that someone will pay a more foolish price at a later date. This approach is fine as long as the momentum is toward higher prices and rising overall valuations. But just like musical chairs, someone eventually gets left with-out a chair. At some point, the number of greater fools willing to buy momentum stocks at increasingly overvalued prices will dwindle. Importantly, if you view stocks as businesses, your investment horizon by necessity will become long-term. This ability to focus on the long term, more than anything else, is what will position an investor for eventual success. In today's world of instant communication, there are many forces at work trying to separate them from their holdings. In requires discipline to hold on. The most difficult force to withstand is today's all-knowing media. Investors are deluged with news and opinions on the meaning of that news, almost as soon as it happens. They hear about it on TV, read about it in their newspapers, and learn about it from their brokers. But being instantly and totally informed about their stocks often forces long-term investors to make too many emotional decisions, one of which is likely to be wrong. Remember, long-established trends are not easily reversed. Most news, as sensational as it may sound at the time, does not involve basic fundamental change. It simply is not as bad or as good as it sounds at the time the news is released. News in the media strive for immediacy. The goal is to instantly inform, but it is the passage of time that puts news into its proper perspective? A person's ability to accurately appraise his or her own psychological makeup and then to use that information to guide market strategy is an essential building block for any successful investor. It is important that investors have a narrow focus and avoid the need to know everything, while concentrating onIy on what they know best. Warren Buffett once said, "As an investor, you must stick within your circle of competence." You have to know what you understand and what you don't understand. It's not terribly important how big that circle of competence is, but it is terribly important that you know where the perimeter is. >>