저자: The Financial Economics · 외국인
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on how to use price behavior as a source of information. Uh, sure Dan, that's a complex question of course. Um, and uh, I think the basic rule in the investment world is that there are no easy answers. Sure. Um, I think what you say is very important. Quoting Ferski, people always say, well, why did that happen?
[clears throat] And sometime the answer is no good reason, right? There's randomness. there's irrationality. Uh, you know, people say, "Well, he was a good man. Why did he die?" Well, you know, there may not be a correlation. Sure, it's a good company. Why did the stock go down? Well, who knows? Sometimes who knows is is the right answer.
And, um, but, uh, people, not just in the investment world, but in general, don't like going through life with the answer who knows. So, as you say, Verski says, they they seek an explanation. make sense of it. Well, sometimes you can't. Sure. Uh I wrote a memo and I'll I'll say that a lot in the course of this interview because I've written for 35 years.
I've written now on almost every topic in investing. Uh a memo called what does the market know? My [clears throat] general conclusion is the market doesn't know anything. Okay. Um the market is not some genius with a high IQ. The market is just the collection of the votes cast by all the people in it.
So by definition, it's not any smarter. Sure. If you get if you get uh you know a million people of average intelligence together, their conclusion is not any smarter than average. It's not like it accumulates to a greater total. Now having said that as you say sometimes price movements are meaningful.
Sure. So I think the answer is you can use it as a signal to think about things a signal to do some research. You see a stock is way up or way down. uh you know, you might try to figure out if there's an obvious reason and try to figure out if the reaction of the stock price to the reason is excessive or insufficient.
Maybe that will tell you there's something worth doing. But I have to stress and I'll stress uh frequently in in this conversation with you that reaching these conclusions requires a very high level of expertise and experience and knowledge that most people don't have. So for the average person to look at a stock and it's up 20% this week and to say why is it up?
Is 20% an overreaction or an underreaction? Will it go up more and should I buy? the vast majority of people aren't equipped to make that decision and and uh if they try to do so they're really deliluding themselves. Understood. Um also in that note you wrote about how there are no immutable rules in investing that can be relied upon to produce the same results always.
Um yet investors do tend to make rules based on their experience mostly to mostly to protect themselves from repeating the same mistake. Never let your largest position become x% of the portfolio or be greater. Well, next time when the XYZ are true, buy the stock. Um rules aren't perfect, but they can help an investor stay disciplined.
Yes. What are some of your rules that you like to share? Well, I think I think you know there's an old saying rules are made to be broken. Okay. Uh you can you can have general policies, okay? But I think it's important to be uh to be ready to break them as necessary. Um I mean a great example is uh some people adopt a rule that if you buy a stock, if it goes down x% you should sell it.
Uh it's called the stop-loss order. Sure. So let's say you say if I buy a stock and it goes down 10% I sell it. You have to think about what does that mean? That means that if you if you sell every stock that goes down 10% you can never lose 20%. Or 30% or 40%. But every once in a while you'll have a stock you'll buy it.
It'll go down 10% you'll sell it and then it'll go up 100% from there and you'll miss all of those too. Sure. There is no rule uh that you can set to help you negotiate that. It's not down 10 or down 20. There is no automatic rule that will uh keep you safe but not result in you missing opportunities.
Um you know I mean I've always taken the approach that if you have a great success you should sell some. We say take a little off the table. Sure. In order to capture some of the gain so that if it turns out to be fleeting you won't give it all up. Mhm. But if you if you buy something is up 30% you sell some that means that if it goes up 60% that part you won't get a get get a ride on.
Right? So it's not that the wrong that the rule is wrong or right. The question is is it right for you? Right. Now the point is like I said about the stop-loss order it it prevents great losses but it also uh causes you to miss some successes. Yeah. You have to decide which is which is more important to you.
Mhm. based on your financial situation, your personality, those kinds of considerations. So, you know, my idea of of uh taking a little off the table. Sure. If you buy something, it goes up 30%. You sell some, then it goes up another 30%, you sell some more, another 30%. Well, you would have made more money if you held on.
But on the other hand, if it went up 30% and then back down, you would have failed to tie up any of the profits. Which one of those two? You can't do both, right? You can't you can't secure part of your profit and let it all ride, right? So, every person has to work out for themselves uh what's right for them.
You can't do this stuff perfectly. Yeah. What is the definition of good for you is the question.
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