Book Notes – The Education of a Value Investor

I just finished Guy Spier’s book The Education of a Value Investor.  Whilst I thoroughly enjoyed the book and would certainly recommend it to people who have read a large amount of books on value investing, it probably won’t go on the recommended reading list on this blog as I’m trying to limit it to a few of my absolute favorite books with really actionable ideas.  The most interesting aspect of the book for me was the extent to which Guy took actions in order to tray and avoid the pitfalls of human emotions in his investing.  Trying to avoid our inherent psychological and emotional biases is a fundamental part of my approach to investing, so I particularly enjoyed hearing how Guy dealt with the issue.  Some of the actions he took included:

  1. Not just moving office, not just moving cities, but moving to an entirely different country (from the US to Switzerland);
  2. Removing the Bloomberg terminal from his immediate office space;
  3. Checking stock prices at most once a week, and only checking the price of one stock at a time;
  4. Placing orders with his brokers only when the market was closed;
  5. 2 year moratorium on selling stocks that had fallen significantly in price; and
  6. Only discussing specific stocks with investors in his fund once he has sold them.

These are just a few of the actions he took, so you can see how concerned he is with the prospect of being influenced by his emotions.  One of the things that is helpful when making an honest assessment of this issue is understanding that many of the influences are happening subconsciously.  We all like to think that we are slightly different and we will be able to deal with circumstances or information more rationally than other people, which will allow us to avoid psychological biases.  However, the reality is that the vast majority of the problem is happening without us even realizing it.  Therefore, the best way to deal with the issue is to remove or avoid as many of the circumstances, people and information that may result in our subconscious psyche being affected in a negative way, rather than relying on our ability to rationalize those negative items and ignore them.

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