51 - Psychology of Selling Losers
Release Date: 11/24/2019
82 - Why Banking is an Attractive Industry
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
Banking is an industry with characteristics that are quite attractive to long-term investors. Properly evaluated, a bank can make a great investment. High retention rates, lower competition over time, and the durability of the industry are what attract me to bank investing.
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81 - Always Ask Why: Bond Returns, Greater Fool Theory, and the 5 Why Framework
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
Investors should always ask why when evaluating investments. This includes understanding the underlying reasons for their investing strategy, why they earn an excess return, and the edge of their circle of competence.
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80 - Zero Interest Rates should not reduce your Discount Rate
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
When the Fed reduces interest rates to zero the first-order effect is a disincentive to save. Yet, zero interest rates should not reduce your discount rate because the second-order effect is because lower returns would increase your need to save money.
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79 - How Banks Make Money
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
Banking is a perfect example of a capital intensive business. A bank cannot grow unless it receives capital in the form of deposits. Deposits are the lifeblood of a bank and only through healthy deposit growth can a bank sustainably grow loans and therefore profits.
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78 - Earnings Yield on Cost: A valuation rule of thumb
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
Stocks must eventually trade at an earnings yield on cost equal to or greater than your discount rate in order to earn your required return on capital as an investor.
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77 - What is the source of your investment return?
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
Investing, as opposed to speculation or gambling, is a method of seeking returns while protecting our principal. You are not entitled to investment returns. So what is the source of your returns?
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76 - How to identify 10-bagger investments (10x in 10 years)
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
In order for an investment to become a 10-bagger and earn 10x your money in 10 years it needs to have certain traits: Low price, operating leverage, turnaround situation, overlooked company, and earnings growth.
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75 - Managing multiple investment strategies in a single portfolio
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
In this episode, I describe how to incorporate multiple investing strategies into a single stock portfolio. Your portfolio can successfully leverage dividend growth investing, momentum, high-quality stocks, and deep value stocks like net-nets.
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74 - Merger Arbitrage: High returns from high certainty bets
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
Merger Arbitrage is an investing strategy designed to capture the value in price differences between a soon to be acquired company and the acquisition price. Investors can sometimes earn high returns at low risk using this strategy.
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73 - Economic Contagion: How COVID-19 could cause a depression
The DIY Investing Podcast: Value Investing | Fundamental Analysis | Mental Models | Business Management
Investors today are likely underestimating the second-order effects of the coronavirus shutdown. Layoffs and bankruptcies will have long-lasting adverse effects on the economy. COVID-19 is not simply a health crisis. If the number of layoffs and bankruptcies gets too high, the economy will likely exceed a simple recession and enter a medium-term depression.
info_outlineMental Models discussed in this podcast:
- Opportunity cost
- Loss Aversion
- Diversification vs Concentration
- Price Anchoring
- Zero-Based Budgeting
- Commitment Bias
- Game Theory: Minimax Theorem
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Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode51
My portfolio Current/Future State
- Owned 11 stocks
- 5 winners
- 5 losers
- 1 borderline loser
- The goal is to reduce to 5 positions
- Sold 4 stocks so far (made money on 2, lost money on 2)
- Not all "losers" lost money. Some made money.
- It's all about future return potential from here
Summary:
It's all about opportunity cost. Use rational analysis to overcome your behavioral biases.