Why stock prices move (Part 2 – The Long Term)

At a glance An investor needs to remember that a stock price represents ownership in an underlying business Therefore, a “fair value” for a stock depends on the market’s projection of future business performance Wearing an optimistic or a pessimistic lens can provide large ranges for this “fair value” The opportunity for the calm investor is in not getting caught up in the overly optimistic or the pessimistic views and comparing a prevailing stock price with what would be a realistic price based on historical business performance “In the short run, the market is a voting machine but in the

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Financial media is information overload

At a glance A barrage of information confronts every potential buyer of equities, from tv channels to in-depth articles on economics When not at cross-purposes in their views, news and expert sources provide frequently and dramatically changing outlooks However, market movements in the short-term are often inexplicable and what can only be considered “irrational” The calm investor is best served by tuning out the majority of the information and only focusing on identifying the right companies Let’s say you recognize the corrosiveness of inflation (Why do we invest?)  and bow before the power that is compounding (The most powerful force

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Equities over other asset classes

At a glance Inertia tends to be one of the key reasons most of us do not practice any asset-allocation Equities are one of the more rewarding asset-classes based on traditional risk-return metrics While Indian markets have been volatile (like the rest of the world), there have been more up years than down over the last 20 years Equities outperform Fixed Deposits over the long-term, especially when considering tax impact In spite of inherent volatility, over investing horizons of 5+ years equities are a ‘safe’ asset class Small-ticket, diversification and the real-time learning offered by equities are advantages over other

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Hello FY2015! Introducing ‘The Calm Investor’

This is our “Hello World” post. Welcome to thecalminvestor.com! ‘The Calm Investor’ is an informational website on the topic of equity investing, mainly in the Indian markets. Investing, and particularly equity investing is an industry with high-visibility. An industry associated with shiny tickers, slick graphics, smartly turned out commentators and the big headlines in the pink newspapers. There is something irresistible to the idea of “buying” and “selling” companies based on opinions formed about their short or long-term prospects. There are few things as reaffirming to one’s intelligent self-image as it to make the make the “right” call and to

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