Some years back I was reading John's blog Base Hit Investing.
He did up a table where he recorded the 52 week high and low prices of the top companies in the S&P 500.
I started doing that once every quarter.
And it's made me a better investor. You should do it too. Here's why:
He did up a table where he recorded the 52 week high and low prices of the top companies in the S&P 500.
I started doing that once every quarter.
And it's made me a better investor. You should do it too. Here's why:
1. Teaches you that Mr Market is crazy
Look at one of the companies - Alphabet/ Google.
Its diff in market cap in a 1 year period is 900B.
That's a 47% difference between high and low.
For such a well known business, you wouldn't have expected such huge swings.
(Continued..)
Look at one of the companies - Alphabet/ Google.
Its diff in market cap in a 1 year period is 900B.
That's a 47% difference between high and low.
For such a well known business, you wouldn't have expected such huge swings.
(Continued..)
1b. Imagine a private owner wanting to buy Google...
You would never see such a stark contrast in offer price within 1 year.
It tells you that Mr Market is crazy.
So learn to see it for what it is.
The market is there to serve you. Not instruct you.
You would never see such a stark contrast in offer price within 1 year.
It tells you that Mr Market is crazy.
So learn to see it for what it is.
The market is there to serve you. Not instruct you.
2. Prices tell you nothing about the business
Real business change is slow and gradual.
But yet the stock price swings so wildly in just 52 wks.
Price only tells you the demand and supply for that company's stock at that point of time.
It's an illusion. Remember that.
Real business change is slow and gradual.
But yet the stock price swings so wildly in just 52 wks.
Price only tells you the demand and supply for that company's stock at that point of time.
It's an illusion. Remember that.
3. Volatility is a good thing
As public investors, volatility is our friend.
Where else can you find sweet opportunities to buy a great business at hundreds of billions less than it was?
Private buyers won't enjoy this.
This helps you appreciate corrections without fear.
As public investors, volatility is our friend.
Where else can you find sweet opportunities to buy a great business at hundreds of billions less than it was?
Private buyers won't enjoy this.
This helps you appreciate corrections without fear.
4. Gives you a behaviour advantage
Most investors are short term.
It's not their fault. There's just too much noise and fear.
No one wants to own a stock that they think will go down in the next 6 months, even if they think it will be worth much more in 3 years.
(Continued..)
Most investors are short term.
It's not their fault. There's just too much noise and fear.
No one wants to own a stock that they think will go down in the next 6 months, even if they think it will be worth much more in 3 years.
(Continued..)
4b. That's what gives long term investors an advantage.
You can make $$ simply by having a longer time horizon than others.
By behaving differently, you'll profit from their short-termism.
The stock market is a tool to transfer wealth from the impatient to the patient.
You can make $$ simply by having a longer time horizon than others.
By behaving differently, you'll profit from their short-termism.
The stock market is a tool to transfer wealth from the impatient to the patient.
5. View volatility as a fee, not a fine.
Wild swings are the price of admission you must pay to generate huge wealth.
When you see it as a fee, you learn to accept it.
With acceptance, you're more willing to hold on for the ride.
But if you see it as a fine, you won't.
Wild swings are the price of admission you must pay to generate huge wealth.
When you see it as a fee, you learn to accept it.
With acceptance, you're more willing to hold on for the ride.
But if you see it as a fine, you won't.
That's it.
I encourage all investors to do this simple activity once a quarter.
It only takes 20 mins.
But it gives you immunity against the virus known as short-termism.
Helps you see stock price swings merely as illusions.
It keeps you grounded and helps you hold on.
I encourage all investors to do this simple activity once a quarter.
It only takes 20 mins.
But it gives you immunity against the virus known as short-termism.
Helps you see stock price swings merely as illusions.
It keeps you grounded and helps you hold on.
If you find this helpful, then follow me here at @heymaxkoh
I share how I reached financial freedom before age 30.
Also check out this mega thread of mine that went viral, revealing the top tweets that helped me grow my 6 figure portfolio multiple times
I share how I reached financial freedom before age 30.
Also check out this mega thread of mine that went viral, revealing the top tweets that helped me grow my 6 figure portfolio multiple times
https://twitter.com/heymaxkoh/status/1442866121766432777?s=20
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