Friday, October 4, 2013

Why People Don't Succeed in Value Investing

Jason Zweig writes “The Intelligent Investor” column on the Wall Street Journal’s Website (  The edition of Benjamin Graham’s “The Intelligent Investor” book with Zweig’s commentary is considered to be the version to read. His post on "Value Stocks Are Hot—But Most Investors Will Burn Out" dated 18th February 2013 makes the most sense on why so many investors do not succeed when they take the value investing approach and I thought it would be good to share with readers

Some important excerpt from the article:

  • "Most people aren't cut out for value investing, because human nature shrinks from pain," the money manager Jean-Marie Eveillard told me this past week. His words are a reminder thatmaking money on cheap stocks—the goal of every value investor—is harder than it sounds and can take years to play out 
  • The fund industry has long marketed the chimera of "consistency," the idea that a great stock picker can always earn higher returns than the market. Investors who buy into this myth often sell in a panic as soon as the next crash proves that no stock picker can always outperform
  • Summit Street Capital Management, an investment partnership in New York, recently analyzed a group of value investors with long records of superior returns and found that even the best underperformed one-third to 40% of the time. "It's hard not to get shaken out unless you understand that and have conviction," says Summit Street partner Jennifer Wallace
  • To be a value investor, it isn't enough to buy cheap stocks or the funds that own them. You have to stick around until the market recognizes their worth. Mr. Eveillard, now 73 years old and an adviser to his old fund, is still finding bargains in Japan and among gold-mining stocks—but he is prepared to "suffer" until the market proves him right
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