Big Money Thinks Small: Biases, Blind Spots, and Smarter Investing
September 24, 2017 • Reprints
In "Big Money Thinks Small," thirty-six-year veteran fund manager Joel Tillinghast shows investors successful stock market investing in this informative manual.
One of the most persuasive tips Tillinghast offers is to only invest in businesses that you understand, which explains how an obscure economist came to launch the market-beating Fidelity Low-Priced Stock fund nearly 28 years ago.
Tillinghast explains how the best investment risks are those that you can analyze and that offer favorable odds. Unless you have taken the time to understand the details, complexity is your enemy.
Big Money Thinks Small points out that some investors may develop a false sense of confidence after reaping large profits on luck bets. More often than not high-stakes gambles backfire, not only hitting you in the balance sheet but also taking a mental and emotional toll.
To remain emotionally focused in such a volatile profession, Tillinghast provides a very useful checklist written for investors at all levels. These principles can be seen as a useful list of do’s and don’ts:
Do not invest emotionally using your “gut”; Do invest patiently and rationally.
Do not invest in things you don’t understand, using knowledge you don’t have; Do invest in what you know.
Do not invest with crooks or idiots; Do invest with capable, honest managers.
Do not invest in faddish or fast-changing, commoditized businesses with a lot of debt; Do invest in resilient businesses with a niche and strong balance sheet.
Do not invest in red-hot “story” stocks; Do invest in bargain-priced stocks.
This practical, no-nonsense guide doesn’t reveal specifics on where to invest, but it does speak to the value of human judgment, so you can generate your own informed choices.
Tillinghast urges investors to act cautiously and follow primary steps to successful investing and he provides tables and figures to give a psychological breakdown of traits of successful investing.
He also addresses relevant questions including how to anticipate market changes. Tillinghast explains how to be patient, self-aware and how to plan methodically, which will pay far greater dividends than flashy investments.
In Big Money Thinks Small, some discussions are fairly basic; such as how to select trustworthy money managers; but other are more robust points, such as how to value stock properly.
Tillinghast teaches readers how to learn from their mistakes and his own: He stresses avoiding emotional decisions, investments that you don’t understand well, bad people and unstable business. While most of these lessons are pretty basic, it doesn’t hurt to be reminded of them because it only takes one bad decision to lose a fortune.
Big Money Thinks Small explores the tools investors need to ask the right questions in any situation and feel empowered to think objectively and accordingly about portfolio management.