Monday, August 29, 2016

Having an Edge in Investing

How to make money by correctly allocating assets among asset classes, instruments is a topic of much discussions and debates. I would like to make a little effort of mine that might add value to anyone who is interested in learning what one a great investor.

But, first let me start with the basics. What is investing? Investing is an conscious act by a rational person who decides to buy a certain item, so that sell it at a later time for a greater price, which after taking into consideration the element of time, should provide more in buying power to the investee.

How successfull investing is done, is another question. The matter of investing comes, to who has the most edge. The edge might have various definitions, such as the informational edge, edge in time (duarion in which company might stay invested), analytical edge.

Here are the definitions for each of the edges listed above:

1. Informational Edge: this is the most miunderstood edge that any investor might have. Most people might confuse it with having an inside type of imforamtion,. however, I believe that a curious and open minded investor might just by absorbing evey bit of material about a company, identify a certain type of information that might help him form a well rounded thesis on a company.

2. Time Edge: What makes Warren Buffett from most of the investors, aside from his capital allocation skills, it's a the time that he gives the investment to work. In one of his speeches, he gave a clear message, that he is perfectly ok with holding invesments for a long times, and some of the businesses he intends to hold forever. This is clearly an edge that differentiates him from most of the investors. It's easier to know what will happen,. rather than when. Therefore, it's a huge advantage if one can hold investmnents for long stretches of time.

3. Analytical Edge: In an analyists mind, the more information does not necceasiry mean better results. The more high quality information the better. However, sometimes, another factor sets in that makes the difference. It' snot just the quality and quantity of information presented to the analyst, but it's actually who he or she does with this piece of information. What makes Mr. Warren Buffett unique in the field of investing is not the quantity of information that he possesses, but rathher his prodiguous ability to correctly process the information that make a whole lot more sense. That fact alone makes him an important figure in the world of common investing.

What the above three factors tell us is that, in the field of common stock investing, it's absolutely important to have an edge that would place you ahead of the pack.

No comments:

April 2, 2017 Astana, Kazakhstan Frist Quarter (Q1) 2017 Update Report Dear Partner, During Q1, the Green Valley Fund (“GV...