My investing muse - we cannot invest based on borrowed convictions 17Feb2022

Just because a certain investor bought in a certain number of shares of a certain company, it does not mean that this guaranteed profit.  Recently, Soros's investing firm bought in  $Rivian Automotive, Inc.(RIVN)$ , this remains something puzzling for me as the company will remain in the red for the coming quarters till they have ramped up their production.

If we cannot explain the business to a young child within 5 minutes, I am afraid that we do not know the business well enough.  After we have completed studies of the annual & earnings reports, we can establish an approximate value of a company.  Should prices fall, we do not need to join the mass sell off caused by panic.  Why do we need to run away from a sale - when a good company is available at good discounts (with a good margin of safety)?  We can even consider adding to our positions cause we understand that the current price does not always reflect the value of a business.  

The father of value investing, Benjamin Graham, explained this concept by saying that in the short run, the market is like a voting machine--tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine--assessing the substance of a company.

We may not get it right all the time but a combination of fundamental and technical can help us become more successful in our investing journey. B efore I take any long term investing position, I have checked the financial performances of last few years and the technical indicators for a good entry point.  Going through such an exercise helps me to gain discipline and avoid making trades based on FOMO or emotions. I may have missed chances of better profits but I have definitely avoided bigger losses.  To master investment, let us first master our emotions.

Have a great week all.