
The investor’s dilemma: Earnings, valuation and what to do now - tortilla
http://www.washingtonpost.com/business/market-action-a-conversation-between-investors/2011/09/07/gIQA7KU5EK_print.html
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jakarta
Analysts at bank tend to be too short term focused. That's pretty much it.

It's next to impossible to figure out how things are going to change in just 3
months, but analysts tailor their estimates and reports to arrive at where
stocks will be within that timespan.

The best use of analysts is not so much to arrive at where to buy and sell a
stock but rather to obtain data on supply / demand which you can use to come
to your own conclusions.

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nirvana
I recommend anyone who is interested in investing read some of the good books
on the subject. The millionaire next door, or the wealthy barber are fine.
Buffetology is good if you're fairly new, while Timothy Vicks "Invest like
Warren Buffett" or any of this other books about Buffett are better.

Don't get your advice from newspaper articles, which are generally written by
reporters, like this one. The massive spending our government is doing, along
with the terrible shape that many states and municipalities are in, make
holding %50 of your money in bonds more risky than "conventional wisdom"
assumes.

The events in the real estate market alone should be a wake up call that
conventional wisdom ("real estate never goes down") is not always right, you
have to do your homework and use judgement.

Also, not a big fan of the TV and radio financial gurus. Generally they give
excellent advice when it comes to getting out of debt and getting your
spending under control, but terrible advice when it comes to actually
investing, generally because they are advising the lowest common denominator
(not smart people like the ones reading this forum.)

I've been investing personally for about 20 years, and what I learned was that
my returns were %100 a result of discipline and rationality, not the state of
the market. The best discipline is to invest only when you know what your
return is going to be beforehand. IF you're guessing, you're gambling. If you
understand the risk well enough to calculate it, then you'll do much better.
And if you don't, or can't understand the risks, then stay out until you do.
Some of my most profitable investment periods were the ones where I pulled out
because the markets were not acting as I expected, and in doing so, I avoided
the losses my strategy would have otherwise given me.

Failing to lose %50, and then making %25 the next year is a %100 return
compared to losing the %50 and then making %25 from the smaller base. (EG: You
have $100 on the sidelines, then earn $25, giving you $125, verses, losing
$50, then earning $12.50 giving you $62.50.)

