Investment Philosophies: Successful Strategies and the Investors Who Made Them Work

The guide for investors who want a better understanding of investment strategies that have stood the test of time. This thoroughly revised and updated edition of Investment Philosophies covers different investment philosophies and reveal the beliefs that underlie each one, the evidence on whether the strategies that arise from the philosophy actually produce results, and what an investor needs to bring to the table to make the philosophy work. The book covers a wealth of strategies including indexing, passive and activist value investing, growth investing, chart/technical analysis, market timing, arbitrage, and many more investment philosophies.

Why Do You Need An Investment Philosophy?

Most investors have no investment philosophy, and the same can be said about many money managers and professional investment advisers. They adopt investment strategies that seem to work (for other investors) and abandon them when they do not. Why, you might ask, if this is possible, do you need an investment philosophy? The answer is simple. In the absence of an investment philosophy, you will tend to shift from strategy to strategy simply based on a strong sales pitch from a proponent or perceived recent success. There are three negative consequences for your portfolio:

1. Lacking a rudder or a core set of beliefs, you will be easy prey for charlatans and pretenders, with each one claiming to have found the magic strategy that beats the market.
2. As you switch from strategy to strategy, you will have to change your portfolio, resulting in high transaction costs, and you will pay more in taxes.
3. While there may be strategies that do work for some investors, they may not be appropriate for you, given your objectives, risk aversion, and personal characteristics. In addition to having a portfolio that underperforms the market, you are likely to find yourself with an ulcer or worse.

With a strong sense of core beliefs, you will have far more control over your destiny. Not only will you be able to reject strategies that do not fit your core beliefs about markets, but you will also be able to tailor investment strategies to your needs. In addition, you will be able to get much more of a big picture view of both what it is that is truly different across strategies and what they have in common.

Contents:

• Upside, Downside: Understanding Risk
• Numbers Don’t Lie—Or Do They?
• Show Me the Money: The Basics of Valuation
• Many a Slip: Trading, Execution, and Taxes
• Too Good to Be True? Testing Investment Strategies
• Smoke and Mirrors? Price Patterns, Volume Charts, and Technical Analysis
• Graham’s Disciples: Value Investing
• The Allure of Growth: Small Cap and Growth Investing
• Information Pays: Trading on News
• A Sure Profit: The Essence of Arbitrage
• The Impossible Dream? Timing the Market
• Ready to Give Up? The Allure of Indexing
• A Road Map to Choosing an Investment Philosophy

Investment Philosophies: Successful Strategies and the Investors Who Made Them Work By Aswath Damodaran pdf