Rule #1 Finance Blog

With Investor Phil Town

Invested: Rule #1 Podcast, Episode 07- Buy Fear, Sell Greed

Phil and Danielle discuss a few different market theories and books written over the years to try to answer Danielle’s question of,

“We only can see the price of a stock today of the company that we want to buy. How do you know if THAT price is a good price or not?

The stock market definitely gets overpriced, however over the long term it usually is rational. Phil explains how and why you should be buying when there is fear in the stock market and selling when there is greed in the stock market.

They also attempt to answer if it is possible for a monkey to randomly flip coins and get 100 heads in a row.

Enjoy!

 

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In Episode 07 You Will Learn

1. Phil dispels some myths of investing, that value and price are the same, there are no discounts, and that you can’t beat the stock market. 3:00

2. The definition of Mr. Market. 2:50

3. Your basic instincts of greed and fear when it comes to the stock market cause you to make the wrong decisions in investing. 7:00

4. If you don’t research a business and you’re investing in it, you are gambling. 13:00

5. Burton Malkial, Princeton Economics, Random Walk on Wall Street calling Buffett an “outlier” even though he had been crushing the market for years. 14:15

6. Nicolas Taleb, Black Swan the probability of a monkey flipping 100 heads. 16:52

7. Paradigm Theory, if someone has deep roots in a certain paradigm they will ignore the actual evidence. 18:35

8. Long term everyone agrees that the market is efficient and will price businesses correctly. 19:30

9. Buffet, “Would it be random if all of the monkeys flipping 100 heads in a row, were in the same zoo?” In the 1980’s, everyone who was investing like Buffett was crushing the market. 21:30

10. Doing your research and doing your homework on a business helps to alleviate fears of investing your own money into it. Don’t buy a company based on pure speculation. 24:40

Show Notes

Mr. Market

Nicolas Taleb “Black Swan”

The Superinvestors of Graham-and-Doddsville

Robert Shiller

Irrational Exuberance

Efficient Market Hypothesis

Burton Malkial

Random Walk Down Wall Street

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On the InvestED podcast, Phil and his daughter Danielle shine a light on the successful investing strategies that gurus like Warren Buffett have used for 80 years. Listen in for a great stock market education on basics, learn how to invest on your own, and follow along with real-time examples and investing tips from week to week.