Phil Town-What its Worth
Phil Town Gives Advice to Investors.
This is not a unique concept. Let’s figure out what something is worth before we buy it. You do it all the time for almost everything you buy. But for certain (but wrong) reasons, that’s what investors very clearly do NOT do when they consider buying into a business. The key to great investing is to be rational. To NOT get caught in the emotion of the moment that’s sweeping the country. If we can stay rational and figure out what a business is worth as a business before we buy it, and then buy it for less than its worth, we’re going to be very successful investors. Well, that’s not true. Investors most certainly do do that when they buy a piece of a private business like a restaurant or a laundry. But they don’t do it when they buy a piece of a PUBLIC business – when they buy shares of stock. When they do buy stock they assume that because there are so many smart people buying the stock that day at that price, the price must be what its worth. In fact, in the stock market, EMOTION is huge player for a Rule #1 investor. Its definitely not the uber-rational place its made out to be. Robert Shiller, a Yale economist, made that very point in his best seller, “Irrational Exhuberance”. In it, in 1999, he predicted the coming stock market crash. The key to great investing is to be rational. To NOT get caught in the emotion of the moment that’s sweeping the country. If we can stay rational and figure out what a business is worth as a business before we buy it, and then buy it for less than its worth, we’re going to be very successful investors. He also predicted the real estate dive. People get extremely emotionally caught up in the stock market because so much money is at stake. When the market is going up, they get greedy and buy just because they don’t want to miss out on easy money. And they freak out when the market is going down and they sell because they are afraid of losing everything.
Now go play. - Phil Town