Investing Discipline 101

A lot of value investors highlight the importance of ignoring macroeconomics and adhering the concept of intrinsic value of businesses while making stock investments. Based on this, we have formulated a discipline to ignore macro noises and focus on the margin of safety and valuation.

Reusable: Warren Buffett Squawk Box 05-06-2013 - 004
Source: CNBC

“Forming macro opinions or listening to the macro or market predictions of others is a waste of time.”

Warren Buffett

“Gigantic macroeconomic predictions are something I’ve never made any money on, and neither has Warren.”

Charlie Munger

“Charlie and I don’t pay attention to macro forecasts.”

Warren Buffett

Macroeconomic policies try to stimulate the nation’s overall economic growth. It is with no doubt one can tell that they are important variables in an economy. However, focusing on those variables are not quite rewarding to investors. As far as stock investing is concerned, we, here at Arrow of Performance, try to avoid our purchase and sale decisions based on the Macroeconomic policies and forecasts. Such as:

  1. Gross Domestic Product
  2. Population
  3. Economic Growth
  4. Unemployment
  5. Labor and Wages
  6. Economics of Taxation
  7. Government Spending
  8. Inflation
  9. Poverty
  10. Monetary Policy
  11. Business Cycle

Thanks to the wisdom of great investors, it makes our efforts easier. These are the types of questions we ignore.

  • Are we going to sell our holdings because economic expansion is slowing down? I don’t think so.
  • Are we going to buy Banks stocks because the interest rate is expected to go down? I don’t think so.

Now, we are left with the things that are believed to be of prime importance to investors. The Microeconomics is the key to understand the business and the growth potential of the business. Understanding these variables will enable investors to uncover the valuation of the business. Such as:

  1. Supply
  2. Demand
  3. Price
  4. Competition, and Market Structure

Our effort is to make investing as simple as possible for us and others like us. We try to learn from the great investors, especially from their mistakes and experiences. We will try to highlight these microeconomics concepts in detail. They deserve a post of their own.

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