Speculation vs Investing

February 10, 2010

I was reading “Margin of Safety” one of the very coveted books which is written by Klarman. He suggests that most investors find consensus with the crowd, one fool buys at a price without analyzing the fundamentals and he is looking for another fool to pay even more . I do agree that this benefits the value investor in the way that it creates opportunities when the market starts falling , and Mr. Market ( term coined by Benjamin Graham) starts selling good businesses on a firesale. This might sound like old advice wrapped in a new cover. But  I still think human nature is still the same, We still find comfort in consensus and in investing, act on a feeling(What goes down has to come up) rather than the numbers. Although some short term opportunities do exists due to this behavior by most of the stock market. I believe, The smartest people are the ones who take the dough.


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