Investing

Hi Bristlemouthers,

I'm interviewing Dan Ariely for an Intelligent Investor podcast on Wednesday. We want to do a small experiment before the podcast, though, and need your help.

Could you please answer the two questions below? Please don't look at Google and don't worry, you'll understand when you listen to the podcast.

How large an investment position can you take in a stock that offers exceptional value?

It’s a question that is debated rigorously amongst the analysts at Intelligent Investor, because it can mean the difference between returns that are mediocre, exceptional or disastrous. In Fortune’s Formula, author William Poundstone provides a fascinating account of a mathematical approach to position sizing, known as Kelly’s criterion, which has been employed with some success by a range of hedge funds since the 1970’s. There are some useful lessons for stockmarket investors.

On a Comrades race bib, it tells you how many Comrades the runner has completed. Inexperienced runners, like myself, seek out those with double digits on their bib for advice. There’s a consistent theme from every single one of them: ‘take the first half easy’;  ‘give the climbs the respect they deserve or you’ll pay for it at the back end’; ‘make sure you take more than half your target time to reach half way’.

 I’d heard and read the same advice dozens of times and told everyone that my plan was to do exactly that. Take it very slow to the 70km mark, and see what’s left in the tank.

It’s always a double edged sword being interviewed by the media. Obviously it’s good for business to get some publicity. But the interviewer always has their own agenda, and they get the final cut (just ask Tony Abbott).

JB Hi-Fi is a wonderful business and has provided some sensational returns for investors. But future returns are going to be much harder to come by.

My first steps into the world of funds management have confirmed your worst fears about the industry. For me, though, it's time to get on with making the right investment decisions.

For most companies regulation adds significant risk. For Babcock, it’s more of an opportunity.

To tide you over 'til Monday, here’s a list of interesting stuff doing the rounds of The Intelligent Investor over the past week.

It’s time to change our view of Australia's gambling businesses

Not wanting to be left out, ‘soft’ commodities are having a boom of their own. But there are some crucial differences between growing things and digging them up.