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Succesful Investing - The power of stories
Succesful Investing - The power of stories
Succesful Investing - The power of stories
Succesful Investing - The power of stories
Succesful Investing - The power of stories
Succesful Investing - The power of stories
Succesful Investing - The power of stories
Succesful Investing - The power of stories
Succesful Investing - The power of stories
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Succesful Investing - The power of stories

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We must focus on the the facts - as Dragnet fans will recall "just the facts". Latest presentation in our series on investing

We must focus on the the facts - as Dragnet fans will recall "just the facts". Latest presentation in our series on investing

Published in: Economy & Finance
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  • 1. The Power of Stories“How not to be your own worst enemy”
  • 2. The Power of Stories
  • 3. IntroductionOf all the dangers that investors face, perhaps none is moreseductive than the siren song of stories:1. Stories govern the way we think2. We abandon evidence in favour of a good story3. Stories effectively distort our mental representation of the world
  • 4. IntroductionTesting the theory on a murder trial1. Trial conducted normally – 63% guilty2. Only prosecution could tell the facts of the story – 78% guilty3. Only defence could tell the facts of the story – 31% guiltySo a 50% swing in guilty depending on who could tell the story
  • 5. “The companies that show up on thescreens can be scary and not doingwell, so people find them difficult to buy”– Joel GreenblattLet’s consider how we can build a good game plan…..
  • 6. The Power of StoriesWe see lots of good stories: Growth stocks with high multiples IPO’s (but from 1980 – 2007 IPO’s underperformed markets by 21% per annum for the 3 years after floating) Bubbles – dot-com, commodity exploration companiesWhat happens?The most “admired” companies tend to beexpensive and therefore deliver poorerperformance compared to “despised” stocks.
  • 7. The Power of StoriesPeople like the story and invest –often with horrible resultsStories have emotional content sothey appeal to the X system (thequick and uncritical old brain)“Despised” or bad stories, oftenhave low prices but offer greaterinvestment returns
  • 8. The Power of Stories – taking the right stepsThere are no hard and fast rules but: Use the logical system of thought Focus on cold hard facts – these are likely to be the best defence against the siren song of storiesBen Graham insisted that “safety must bebased on study and standards,” and thatvaluations be “justified by the facts, e.g., theassets, earnings, dividends, definiteprospects, as distinct, let us say, from marketquotations established by artificialmanipulation or distorted by psychologicalexcess”.
  • 9. The Power of Stories – summary Stories govern the way we think Focus on the facts Be wary of “admired” stocks Don’t ignore “despised” stocks

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