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Investing is Most Intelligent When it is Most Businesslike

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?.

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Investing is Most Intelligent When it is Most Businesslike

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  1. Investing is Most Intelligent When it is Most Businesslike November 29, 2012 By Theodor Tonca Simon Fraser University - Harbour Centre Campus

  2. The Basics • What is In-vest-ing? • Building a latticework of multi-disciplinary mental models • Specialized Knowledge

  3. What is In-vest-ing?

  4. "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!

  5. "The action or process of investing money for profit" Not quite, but at least we are grammatically correct :\

  6. "The act of purchasing a business for less than it is intrinsically worth"

  7. Building multi-disciplinary mental models Newton's Laws of Motion Pavlovian Conditioning Rule of 72 Kepner Tregoe Decision Making Model Law of Scale

  8. The Law of Compound Interest Principal + Interest Reinvested = Compound Interest

  9. The Law of Compound Interest in Action

  10. Law of Incentives Self-interest makes the world go round

  11. "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

  12. Specialized Knowledge

  13. What do they do & How do they make money?

  14. What do they do & How do they make money?

  15. What do they do & How do they make money?

  16. The Main Tenets • Safety of Principal & Satisfactory Return • Margin of Safety • Intrinsic Value

  17. Safety of Principal & Satisfactory Return Psst, this is subjective!

  18. “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

  19. First rule of investing: Don't Lose Money! = Safety of principal

  20. Satisfactory return? (This is the subjective part, both contextually and relatively)

  21. What the #$*! is a Margin of Safety?

  22. Only the most important concept of investing. Gosh!

  23. Market Price Intrinsic Value

  24. Intrinsic Value Always approximate, never precise, therein lies the rub.

  25. "Intrinsic, long-term worth is the present value of future net cash flows - under conditions of certainty." - John Burr Williams

  26. The Main Stupidities • Efficient Market/Random Walk Theory • Capital Asset Pricing Model • Beta • GAAP/IFRS Accounting Framework

  27. "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."

  28. The Superinvestors of Graham - and - Doddsville By Warren E. Buffett

  29. The Superinvestors

  30. * 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

  31. 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

  32. "Risk of possible impairment of one's principal."

  33. GAAP/IFRS Accounting Framework Ideas, anyone?

  34. Stock Options Not an expense according to GAAP/IFRS, AAAARRRGGGHHH!

  35. GAAP/IFRS Accounting Different From Tax Accounting Uh, what?

  36. **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.

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