Tag Archives: Margin of safety

In investing, thinking in probabilities is probably better than thinking in absolutes

“Risk means more things can happen than will happen.” Elroy Dimson

One of the most important lessons that I had early on in my investing experience is that it is more productive and profitable to think in probabilities, rather than absolutes. Unfortunately, it is a lesson that I sometimes need to re-learn. What I mean by that is thinking through the buying decision not as “is this stock definitely undervalued?” or “is this stock going to double?”, but rather as “is it more likely than not to be undervalued?” or “is the business more likely to be better in the future than it is now?” It is a subtle difference, but it re-focused my emphasis on not just the upside potential, but on the downside risk. Continue reading

[#throwback] Investing 101: Introduction to (Value) Investing

This was an article I wrote when I was in university 6 years ago for the investing club (I am getting old…). I have learnt a lot more since then, but the core ideas in the article still stayed true. Some of the examples are outdated:

  • for BHP the mining boom has turned into a bust and is undergoing its mini-revival. The stock price of BHP has stayed flat (it is at $23.67 as of 10/3/17). You would have done better buying their South32 spinoff…at the right price of course (Forager Funds  did a great write-up on it 2 years ago).
  • Warren Buffett has bought IBM, airplane stocks and Apple (another testimony of how much of a learning machine he is!)

So without further ado… here it is!

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