Moving It Up

How do you take your investing to the next level?

Source: Public Domain Archive

Investing is complicated. It’s not enough to understand stocks, bonds, accounting, and discounted cash flow. You also need to have insight that the rest of the world doesn’t—or can’t have. Junk bond investor Howard Marks puts it this way:

“First level thinking says, ‘It’s a good company; let’s buy the stock.’ Second level thinking says, ‘It’s a good company, but everyone thinks it’s a great company, and it’s not. So let’s sell.”

Second-level investors have to be able not just to understand a firm’s financial performance but also to get behind that performance. This could come from anticipating economic and cultural trends; it could come from being willing to own unfashionable investments in unpleasant circumstances. After all, cheap stocks and bonds are usually cheap for a reason—like coal mining companies today, or tech stocks after the internet bust.

Second-level thinking is hard. It forces you to think in probabilities, not absolutes. It makes you see both sides of every argument. You have to seek out opinions and research that differ from your own. Above all, keeps you from getting too confident in your own abilities.

Because there are two types of investors: those the market has humbled, and those whom it hasn’t—yet.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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By |2017-07-17T12:22:46+00:00May 22nd, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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