370 likes | 538 Views
Investing is Most Intelligent When it is Most Businesslike. November 29, 2012 By Theodor Tonca Simon Fraser University - Harbour Centre Campus. The Basics. What is In-vest-ing? Building a latticework of multi-disciplinary mental models Specialized Knowledge. What is In-vest-ing?.
E N D
Investing is Most Intelligent When it is Most Businesslike November 29, 2012 By Theodor Tonca Simon Fraser University - Harbour Centre Campus
The Basics • What is In-vest-ing? • Building a latticework of multi-disciplinary mental models • Specialized Knowledge
"The act of expending money with the expectation of achieving a profit or material result by putting it into financial schemes" - Said a great investor NEVER!
"The action or process of investing money for profit" Not quite, but at least we are grammatically correct :\
"The act of purchasing a business for less than it is intrinsically worth"
Building multi-disciplinary mental models Newton's Laws of Motion Pavlovian Conditioning Rule of 72 Kepner Tregoe Decision Making Model Law of Scale
The Law of Compound Interest Principal + Interest Reinvested = Compound Interest
Law of Incentives Self-interest makes the world go round
"It is very hard to get a man to believe non-X when his way of making a living requires him to beleive X." - Upton Sinclair
The Main Tenets • Safety of Principal & Satisfactory Return • Margin of Safety • Intrinsic Value
Safety of Principal & Satisfactory Return Psst, this is subjective!
“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” - Benjamin Graham
First rule of investing: Don't Lose Money! = Safety of principal
Satisfactory return? (This is the subjective part, both contextually and relatively)
Market Price Intrinsic Value
Intrinsic Value Always approximate, never precise, therein lies the rub.
"Intrinsic, long-term worth is the present value of future net cash flows - under conditions of certainty." - John Burr Williams
The Main Stupidities • Efficient Market/Random Walk Theory • Capital Asset Pricing Model • Beta • GAAP/IFRS Accounting Framework
"Efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made."
The Superinvestors of Graham - and - Doddsville By Warren E. Buffett
* Returns prior to 2010 are for Theodor Tonca Joint Account which predates the inception of Graham Theodor & Co. Ltd. + Returns for FY 2012 are calculated through Nov. 29, 2012
E (Ri) - Rf = E(Rm) - Rf ________ Bi E (Ri): Expected Return, Rf: Risk Free Rate, Bi: Beta, E (Rm): Expected Market Return, E (Rm) - Rf: Market (Risk) Premium
GAAP/IFRS Accounting Framework Ideas, anyone?
Stock Options Not an expense according to GAAP/IFRS, AAAARRRGGGHHH!
GAAP/IFRS Accounting Different From Tax Accounting Uh, what?
**Bonus** A bit about me: What i do: Invest (Only because i never learnt how to do anything else well) My ideal day: Quite, undisturbed, all day to read and think Favorite 5 star meal: Hamburgers & Fries (with a milkshake for refreshment) Favorite "Hotspot": Nearest library Proudest Moment: Once scooped $20 worth of coins out of a shopping mall wish fountain without falling in when 7 years old.