FAST FIVE: Value, Margin Of Safety, & The Art Of Doing Nothing

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“Investors seem to want to embrace a value tilt – stocks that will do well as the economic recovery gathers steam. However, they continue to fall back on the tried-and-true growth stocks that have done well so far, through more uncertain times. But what if those old 'value' and 'growth' frameworks are the wrong way to measure market moves?” If you re-read the statement closely, there are a couple of issues that stand out.

Operations not meeting these requirements are speculative.” Graham also noted why individuals should be concerned when they read articles espousing “this time is different.”  “The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is a cause for concern.” – The Intelligent Investor Given the sharp rise in markets since March, it is not surprising the media pushes a host of excuses to justify overpaying for assets.

The Art Of Doing Nothing Such was a point Jesse Felder recently noted: Perhaps the most important lesson about investing I've learned is when there is nothing to do, do nothing. The problem is nothing may actually be the hardest thing to do. We all want to feel like we are being proactive and that requires doing something even when there's nothing to be done.

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Conclusion Another way to think about this is to realize that the vast majority of mistakes investors make come out of a feeling of needing to do something, of being proactive, rather than simply waiting patiently to react to a truly fantastic opportunity. Rather than react only to true opportunity, they react to social pressure or envy when they see their neighbor making a “killing” in dot-com stocks, ala 2000, or residential real estate, ala 2005, or in call options today.” – Jesse Felder As is always the case, it may seem for a while that investors are making money “hand over fist” while the market is rising.

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