Saturday, March 7, 2015

Young Money List of "Flawed Investing Techniques"

Latest Young Money Post: specialization, investing with owner-operators, shareholder activism, using other investors as contrary indicators, buying based on liquidation value.


Taylor Conant said...

It was a great post. I think a more accurate title/approach might be "Risks To Common Investment Techniques". That is really what it is. Any one of these techniques might work in particular contexts in a reliable fashion. But what he has exposed is the "flipside" to these techniques, the risks that are lurking if they're applied without thought or sophistication.

It reminded me of a recent read, "Retail Truths." The author would outline various principles or approaches to retailing that a person could take, often recommending two contradictory ones. The point wasn't to be a hypocrite, it was to show that there is always a tradeoff involved, whichever approach you take, and you're not choosing a benefit so much as you are accepting a particular risk.

I think that is the same with these shortfalls. Any one of these techniques could be useful at times. But they're not curealls. You have to recognize the risk you're assuming with each one, because there is always a risk. That's the biggest flaw in anyone's investing technique, is assuming there is a risk-free way to invest.

CP said...

You are right. These are like what I called "anti-strategies" recently.

It's not that they are inherently bad ideas, but when they are copied by too many people they become crowded and therefore bad ideas.

See also - Batesian mimicry: