Prof bakshi had posted a quiz to his students. You can find the answer to his question in the comments section. I have posted on the same company earlier.
In addition you may find my response in the comments section too. There are several other answers from others in the comments section such as VST, wyeth, divyashakti granite etc. Some of the ideas sound pretty interesting and I would be looking at them closely.
My suggestion – if you are interested in value investing, read prof bakshi’s posts ,articles and interviews. There is a lot you can learn from him.
As an aside - i am reading a book : seeking wisdom - from darwin to munger. This book has been recommended by charlie munger himself. I dont remember the exact comment, but it seems he liked the book so much he bought a copy of this book for all his friends and relatives. He also said that if there are more books like this, he could bankrupt gifting them. I am not sure of the authenticity of the comment. But after reading 60 odd pages, i can tell you that this is a great book, especially if you are looking at developing a latticework of mental models. For those you who may not know charlie munger, he is the vice chairman of berkshire hathaway and a long term partner of warren buffett.
7 comments:
Hi rohit just wanted to know where you picked the book up from? Is it available here in India? Do let me know am looking forward to picking up a copy.
rgds
mark
Hi Vishnu,
I think the point you are describing makes some sense, risk it when you are young and can start all over again.
Regards,
Ranjit kumar
hi vishnu / ranjit
i think there are some unstated assumptions in the article which are not explicit
- assumption 1 : you know what you are doing.
Being 200% invested with margin will work only if you invest well. if one is wrong, then margin call will wipe you out. i dont know about others, but investing is rarely a skill one is born with. it takes time and effort to learn and if you leverage in the begining , then the risk is even higher
assumption 2 : margin interest is not high if it exceeds equity risk premium.
i dont think one can be sure about this. equity risk premiums are not cast in stone. even if i earn 5% extra and use 3% extra margin cost, why take risk of a wipeout for 2% extra returns
I have read the reverse opinion in a lot of places like
- losing money in early years reduces the time your money can compound and hence the terminal value is reduce
- per warren buffet any returns*0 is equal to 0. So personally i would never favor an approach which has even a 1% chance of a wipeout
i have slighlty non convential approach to equity allocation. it may sound strange, but personally for me how much i invest in equity depends not on age or other factor but on the confidence (based on actual results) with which i can pick stocks. As i have improved, i have increased the allocation to stocks.
so much for my short answer !! :)
regards
rohit
Hi rohit, could you tell me where you picked up the book you mentioned in your latest post. Is it available in India?
Rgds
m
Hi mark/anonymous
i am not sure if the book is available in india. I got this from a friend in the US
regards
rohit
"But when you find a very high probability event, you need to bet on big. You can take that chance"
Wrong statement.
This is what I sometimes find a bid odd. People who consider themselves Value Investors decry quantitative finance.
Kindly refer to Kelly's theorm (on communication) where he tells what to bet and how much to bet to maximize profit.
I know I have a holier than thou attitude, but I am a quant guy.
Hi anonymous
i find nothing wrong in this statement. it is completely in synch with kelly's theorem.
the above statement says if you find high probability event , bet big
kelly's theorem quantitifies the big.
the catch is how do you know that the odds you calculate are correct ?
i dont know about others, but i tend to bet lesser than what kelly's theorem suggests because i want to keep a margin of safety due to my own ignorance/ failings etc.
i personally dont understand quant finance and hence have no opinion on it.
actually i find it strange that investing has be like religion where if i belong to the 'value investing' religion, all the other approaches are wrong.
personally i dont subscribe to that kind of a mindset. if i can learn from other approaches , good for me. if i dont understand the other approach, i prefer not have an opinion till i can understand it well and analyse it for its merits or de-merits.
Post a Comment