Archives of “investment performance” tag

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Poker and Trading…Some Rules Applicable to Both.

  
  Education
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Pay Attention…and It Will Pay You. Concentrate on everything when you are playing/trading. Watch and listen; remember to do both and relate the two.

Understand When to Play Aggressively…It’s the Winning Way. Don’t be a tight or a loose player/trader; be a solid one and recognize when it is time to press your bets/positions. To attain superior returns in poker and investing over the long run, grind it out (in stocks until you are up 30%-40%, and then if you have convictions, go for a 100% year). If you can avoid losing and put together a few 100% years, you can achieve outstanding long-term investment performance.

Tells: Look For Them and You Will Find Them. Poker players and stock markets have tells — giveaway moves that are very revealing. Learn to recognize them. History is your textbook.

ESP…It’s a Jellyroll. In those rare instances when all your card knowledge and market judgment/knowledge leaves you in doubt, go with your strong feelings and not against it.

Honor: A Gambler/Trader’s Ace-in-the-Hole. A good reputation and respect from others will put you in good stead.

Be as Competitive as You Can Be. Go into a poker game and into a trade with the idea of completely destroying your opponent or scoring a major investment coup. If you win a pot or make a successful trade, nearly always play the next pot or make the next trade shortly thereafter — within reason. Although the cards and trades might break even in the long run, rushes do happen and momentum often feeds upon itself. When you earn the right to be aggressive, you should be aggressive. When one has a tremendous conviction in a poker hand or trade, you have to go for the jugular.

Art and Science…It takes Both. Both activities are more art than science — that’s why they are so difficult to master. Knowing what to do is about 10% of the game. Knowing how to do it is the other 90%.

Money Management. The same sound principles of money control apply to the business of tournament/professional poker and to successful investing. The way to build long-term returns or poker winnings is through preservation of capital and home runs.

The Important Twins of Poker/Investing, Patience and Staying Power. Come to the poker table or to the markets with enough time to stay and play for a while.

Alertness is a Key. You must stay alert at all times.

So is Discipline.

Never Let Your Mind Dwell on Personal Problems. Never play/trade when you are upset. Make a conscious and constant effort to discover any leaks in your play, and then eliminate them.

Control Your Emotions. Allowing your confidence to be shaken can turn a simple losing streak into a terrible case of going bad. Keep your emotions in check. When you lose a pot or make a poor investment decision, get up, walk around the chair or take some deep breaths. Don’t lose your poise. If a trade or poker hand does not work out, walk away from the position/hand. Be confident enough about your ability to win afterwards.

Top 25 All-Time Warren Buffett Quotes

  
  Education
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When reading Berkshire Hathaway’s annual letters or hearing him speak, one can always take away a few great quotes from value investor extraordinaire Warren Buffett. It should come as no surprise that he is so good at dishing out words of wisdom. After all, he is known as the Oracle of Omaha. We thought it would be prudent to assemble some of his best advice in one cohesive post.MYQUOTES
1. “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1”
2. “In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.”
3. “The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.”
4. “Be fearful when others are greedy. Be greedy when others are fearful.” (more…)

Was Benjamin Graham Skillful or Lucky?

  
  Education
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Last weekend’s Intelligent Investor column looked at the extreme difficulties of disentangling skill from luck when you are evaluating investment performance. It’s the topic of an excellent new book by Michael Mauboussin and a subject of endless fascination – and frustration – to investors.

We tend to think of the greatest investors – say, Peter Lynch, George Soros, John Templeton, Warren Buffett, Benjamin Graham – as being mostly or entirely skillful.

Graham, of course, was the founder of security analysis as a profession, Buffett’s professor and first boss, and the author of the classic book The Intelligent Investor. He is universally regarded as one of the best investors of the 20th century.

But Graham, who outperformed the stock market by an annual average of at least 2.5 percentage points for more than two decades, coyly admitted that much of his remarkable track record may have been due to luck.

In the Postscript chapter of The Intelligent Investor, Graham described “two partners” of an investment firm who put roughly 20% of the assets they managed into a single stock – a highly unusual departure for the conservative managers, who normally diversified widely and seldom invested more than 5% or so in any one holding. (more…)

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