Stocks and horse racing may seem like nothing at all, but they have so many similarities that you can replace the word “horse” with “stock” and still read it.
The author of the book is also a writer for the Daily Racing Form – Steve Crist – has shown readers how to think and behave of the horse racers. Even between the two sectors: securities and horse racing may seem like nothing at all, but they have so many similarities that you can replace the word “horse” with “stock”. Reading up still makes sense.
This book is not only for investors in undervalued stocks but also applicable to investors in all different fields.
Here are 10 lessons that Michael Batnick – Research Director of Ritholtz Wealth Management – draws from this book and is posted by MarketWatch and quoted by BSC Securities in the daily newsletter.
1. Analysis is only a small step in the game.
Investors often do not pay attention to the practice. In fact, if you focus on analyzing indicators but don’t know how to buy and sell properly then failure is inevitable.
2. Mauboussin once said: “It is important how fast the horse is running and the rate chosen.
It is believed that horses with a 70% chance of winning only cost less than 4 USD because the odds are determined by the amount of money the player actually put in each horse.
3. Investors pay too much attention to appearance but forget the inside value.
Even a horse with a high chance of winning can become a bet either very good or very bad and what makes the difference between them is the way you bet.
4. Do you invest in potential stocks and hope to buy at the best price?
“Value = Probability x Cost” – The above formula applies to all horses and bets you place. A horse with a 50% chance of winning is a horse worth betting, rather than a bet on those that only yield a break or a loss.