You don’t need to know everything about a company to determine whether or not it is a good investment. Removing all the superfluous information and focusing on the few crucial factors to a company’s success will simplify the investment process. Determining those crucial factors is a matter of asking the right questions, as Greg Speicher explains.
One common error of investors is to make things too complicated. One embodiment of this is the complex financial models found in analysts’ spreadsheets. Without a grasp of the right questions and a good dollop of wisdom, these can often obfuscate as much as enlighten. There is a reason Buffett does not even use a calculator when valuing a company.
The key to being a great investor is knowing how to ask the right questions and then only investing when you can actually answer them with a high degree of certainty and conviction. You do not need to do this very often. In fact, it is probably not possible to do it very often.
When NBA rookie Derrick Williams worked out with Kobe Bryant over the summer, he asked Bryant what moves he should work on. Bryant told him it was not a question of having a lot of moves, but rather having a small number that he could actually execute and finish – that were unstoppable.
Source:
100 Ways to Beat the Market #25: Ask the right questions (GregSpeicher)
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