Comments on: Buying What You Know

By: We Have A Winner - WordPress for Dummies Edition | The Wisdom Journal

We Have A Winner - WordPress for Dummies Edition | The Wisdom Journal — Tue, 19 Aug 2008 05:13:16 +0000

[...] are a couple of their posts that I have particularly liked: Buying what you know. Dreamkillers. How to increase the odds of getting anything you want. Why are some parents morons? [...]

By: Jerry

Jerry — Fri, 15 Aug 2008 00:02:52 +0000

Buying what you know is fine, but we don’t usually know as much as we like to think that we do! That (betimes considerable) gap between actual knowledge and perceived knowledge leads a lot of people to make foolish choices with money, whether in investments, insurance, or any other related area.
Jerry

By: deepali

deepali — Tue, 12 Aug 2008 16:17:07 +0000

So how is Lululemon doing? (Great here, but I don’t know about the rest of the planet)

By: Dividend Growth Investor

Dividend Growth Investor — Tue, 12 Aug 2008 15:30:48 +0000

I know nothing as well but I believe that by poring over data I could come up with a model that helps investors achieve a rising annual dividend income.
I think that Buffett knows what he is doing because:
1) He bought smaller stocks that had a liquidation values that were several times his acquisition price. He basically acted like private equity. As his partnership/berkshire grew larger he bought larger companies.
2) He did arbitrade opportunities by purchasing stock in companies that will be acquired by a specific date.

I know of a colleague of mine who bought a stock in GRMN last year because she thought she knew it all – she had seen how the company hires a lot of people and its business is booming. For a while my friend was lucky as GRMN leapt from $50 in May 07 to $120 in Sep 07, before ending up in the upper 30′s most recently..

By: jim of Blueprint for Financial Prosperity

jim of Blueprint for Financial Prosperity — Tue, 12 Aug 2008 02:35:42 +0000

You’re right about this maxim being misinterpreted because I’m the same way, I have a CS background but I don’t understand tech stocks. I don’t understand how they are valued when there is no income stream, there is no concept for PE ratios and all that other good stuff, etc. The reality is that knowing the underlying tehcnology doesn’t make me qualified to know the business … which is dangerous when you’re investing in stocks.

By: Squawkfox

Squawkfox — Mon, 11 Aug 2008 22:41:45 +0000

I know nothing. I’m screwed. Snicker.

By: Gates VP

Gates VP — Mon, 11 Aug 2008 17:05:48 +0000

I think this is a classic case of people not “knowing” very much or simply not “knowing” the right things. (i.e.: something economically useful).

“Investing what you know”, is really just a re-word of the entire premise of fundamental analysis. So I don’t know that the snippet can really be taken in a void. At best it’s useful advice when combined with another 20 or so “snippets”.

By: Jerry Hung

Jerry Hung — Mon, 11 Aug 2008 15:35:37 +0000

I am not a big believer in buying what I “know” now, nothing I knew had come out ahead

or you could just buy BRK stocks, then you know you’re buying into what Buffet knows, and not yourself ;P

I recently did, and liked the fact that I don’t have to worry about the stock, or think about it

By: Kyle

Kyle — Mon, 11 Aug 2008 15:35:33 +0000

Lynch himself has come out several times saying he thinks people have taken his message out of context. Yes you should only buy what you are knowledgable about, but that doesn’t mean you should buy something just because you are knowledgable about it. Valuation still matters even if you think the business will be successful in the future.

By: Four Pillars

Four Pillars — Mon, 11 Aug 2008 14:32:39 +0000

Guinness – the book will be called “Mike’s book of bullsh**” – not sure when the book launch will happen since so far, all I have is the title.

Mike