Saturday, March 6, 2010

Jim Chuong on Value Investing

I came across this Canadian fellow by the name of Jim Chuong, who writes a quite fantastic annual letter.

"Shop during bull markets, buy during bear markets. This may seem intuitive, but most don't do this. During rising markets, many people rush to invest their RRSP and non-registered funds into stocks and equity funds."

"A recent example was 2007 where equity funds flourished with infusions of capital. In 2007, my portfolio was heavily weighted in cash. Stocks were expensive so I spent time window shopping. When the economy soured at the end of 2008 and beginning of 2009, when it was time to buy, investors rushed to the exits and equity funds began reporting massive redemptions."

"Meanwhile, the cash portion of my portfolio shrank dramatically as I deployed all available cash. As a general rule, in a 10 year period, an investor should be spending 9 of those years in research and 1 year (in a downturn) buying the best asset that was researched in the last 9."