Chapter 48 [What Is the Difference Between Buying Index Funds Whenever You Have Money, Holding Long Term, Never Selling, and Buffett's Value Investing? Written on June 11, 2022]

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[James Origins and Today] Chapter 48 - What Is the Difference Between Buying Index Funds Whenever You Have Money, Holding Long Term, Never Selling, and Buffett's Value Investing? Written on June 11, 2022 (07/11/2023)

We have always said we are believers in Buffett's value investing, but our method is not investing in individual stocks, and we do not evaluate value. We simply buy whenever we have money. How can this be the same as Buffett's value investing?

The value investing Buffett talks about is buying when the stock price is far below value, and considering selling when the stock price is far above value. Our investment method is to buy whenever we have money. Whether the index fund is high or low, as long as we have money, we buy. We almost do not consider the value of the index fund. Is this different from Buffett's value investing?

Ordinary investors actually cannot evaluate the value of a company, and they do not know how to build a valuation model. Different industries also have different evaluation models. Besides the fact that valuation models use past financial statements for assessment, value also includes future growth, which makes valuation even more difficult. Investors must understand industry analysis and a company's future prospects before they can know so-called growth. This is almost an impossible task for all investors. Even professional managers cannot do it, let alone ordinary retail investors.

Therefore, ordinary retail investors cannot calculate value and almost have no ability to invest in individual stocks. They can only invest in index funds. But the valuation model for index funds is even harder to grasp, and there is no valuation model that has been completely proven effective for long-term use. Since there is no way to know where value is, the only option is to buy whenever you have money, letting value slowly surpass your purchase cost over time. Long-term value will eventually exceed your price, and you will become a value investor.