Research is necessary to be successful in the stock market. By supporting its position, this paper will provide a survey of scholarship on the subject.
In 2006, The Intelligent Investor by Benjamin Graham with commentary by Jason Zweig discussed Peter Lynch’s rule: “No one should ever invest in a company, no matter how great its products or how crowded its parking lot, without studying its financial statements and business value” (Zweig 126). This rule contradicted the belief that one can pick stocks without doing any homework. In the 1980s and early 1990s, the most popular investing slogan, “buy what you know” (Zweig 125). An example of buying what one knows is what Barbra Streisand once said, ‘“We go to Starbucks every day, so I buy Starbucks …show more content…
The author proved this by explaining how doctors determine to admit patients to the intensive care unit (ICU). Studies conducted have shown “approximately twenty thousand patients die every year from hospital-transmitted illness” (Montier 77). A hospital in Michigan reported ninety percent of patients who did not even need to be admitted to the ICU were admitted. Researchers found the doctors were looking at the wrong factors to admit patients to the ICU. They found by using a series of yes or no questions instead of examining all of the symptoms the patient displays “improved both the number of patients correctly sent to the ICU and reduced the number of incorrectly sent to the ICU down to fifty percent” (Montier 82). Montier relates this back to investment and argues, while research is essential to being successful in the stock market, one must “focus on what really matters, rather than trying to know absolutely everything about everything concerned with the investment” (83-84). To further his point, Montier states one should determine the factors one should research and uses to assess investment …show more content…
Buffett believes one should put in time and research before buying shares of a company because “it’s not enough to just know a ticker symbol; one needs to understand what the company does, how it makes its money, and just who is running the show” (Lofton 75). Before the Internet, Buffett had needed to go to the Security and Exchange Commission to see company filings. He would also need to take notes by hand and would visit companies, such as GEICO, which is now owned completely by Berkshire Hathaway, and ask about “the company’s financials and prospects” (Lofton 77). His days and nights are normally spent reading annual reports, business magazines and books, and Lofton compares him to a sponge by “soaking up as much information as possible” (77). Buffett thinks one benefit of research is one can “quickly assess potential deals. He has reportedly said, ‘“Noah did not start building the Ark when it was raining’” (Lofton 78). Buffett also thinks it is important to “actively seek out information that contradicts one’s conclusions, not only information that reinforces them” (Lofton 83). He encourages investors to crave knowledge as he
In 2006, The Intelligent Investor by Benjamin Graham with commentary by Jason Zweig discussed Peter Lynch’s rule: “No one should ever invest in a company, no matter how great its products or how crowded its parking lot, without studying its financial statements and business value” (Zweig 126). This rule contradicted the belief that one can pick stocks without doing any homework. In the 1980s and early 1990s, the most popular investing slogan, “buy what you know” (Zweig 125). An example of buying what one knows is what Barbra Streisand once said, ‘“We go to Starbucks every day, so I buy Starbucks …show more content…
The author proved this by explaining how doctors determine to admit patients to the intensive care unit (ICU). Studies conducted have shown “approximately twenty thousand patients die every year from hospital-transmitted illness” (Montier 77). A hospital in Michigan reported ninety percent of patients who did not even need to be admitted to the ICU were admitted. Researchers found the doctors were looking at the wrong factors to admit patients to the ICU. They found by using a series of yes or no questions instead of examining all of the symptoms the patient displays “improved both the number of patients correctly sent to the ICU and reduced the number of incorrectly sent to the ICU down to fifty percent” (Montier 82). Montier relates this back to investment and argues, while research is essential to being successful in the stock market, one must “focus on what really matters, rather than trying to know absolutely everything about everything concerned with the investment” (83-84). To further his point, Montier states one should determine the factors one should research and uses to assess investment …show more content…
Buffett believes one should put in time and research before buying shares of a company because “it’s not enough to just know a ticker symbol; one needs to understand what the company does, how it makes its money, and just who is running the show” (Lofton 75). Before the Internet, Buffett had needed to go to the Security and Exchange Commission to see company filings. He would also need to take notes by hand and would visit companies, such as GEICO, which is now owned completely by Berkshire Hathaway, and ask about “the company’s financials and prospects” (Lofton 77). His days and nights are normally spent reading annual reports, business magazines and books, and Lofton compares him to a sponge by “soaking up as much information as possible” (77). Buffett thinks one benefit of research is one can “quickly assess potential deals. He has reportedly said, ‘“Noah did not start building the Ark when it was raining’” (Lofton 78). Buffett also thinks it is important to “actively seek out information that contradicts one’s conclusions, not only information that reinforces them” (Lofton 83). He encourages investors to crave knowledge as he