Invested Ep. 158 - Stock Market Indicators: Can You Time The Market? (Part 1.5)

by: Phil Town

This week we continue our discussion about timing in the marketplace, how Warren Buffett strategizes his long-term and short-term investments, and how to determine intrinsic value when buying and selling. Tune in to listen to our continued conversation about why timing the market can help or hurt your investing goals.

1. Timing the market - what is just enough?

  • The perception of timing the market can be misconstrued. The economic storm, around every 10 years drives down stock prices, allows for buying stocks from your target companies to invest in.
  • Moat: The companies with a competitive advantage.
  • Mission: Investing with companies who share the same values and ethics as you.

2. Warren Buffett's Timing Strategy

  • Buffett's strategy during this time is buying cheap individual companies rather than investing in the overall market. Short term is less relevant to where the direction of where the market is going.
  • Long-term direction of the stock market follows American prosperity.
  • Warren says don't sell because of small crashes, wait it out for the long run. The guessing game for buying and selling suddenly is miserable.
  • Time the market based on the true value of the business, not how the market values it.

3. When to Sell

  • If the price of the company driven by the greed of the market gets higher than its real value, it cannot continue rolling onto the future, and you have better places to put the money.
  • Once a business adds intrinsic value, it is only going to grow at the rate of the growth of its cash flow.
  • Going up to intrinsic value is a relatively short-term event (1-3 years), remember price is not the same as value!
  • Hold forever, unless the story changes.
  • Hang on to companies with great potential growth and a high ceiling.

Show Notes:

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