It’s become more obvious to me that most people don’t know what they own. It sounds so simple, but it’s not simple at all. Especially when it relates to publicly traded securities.
@NeckarValue shared a great quip from Charlie Munger, speaking about Ken Langone
Ken Langone has likely read through thousands of prospectuses. But how many people even read an annual report? A financial statement? Or consume any meaningful information related to an investment they’re making?
Sure you can skim the annual report – but how many people actually read the report. And more importantly, can understand what is being presented.
Look at the financial statements for McDonalds, an “easy” business to understand. It’s impossible – look at all the line items and figures – let alone what each of them are made up of.
Take the remaining people who can do all that – now a good buying opportunity needs to be presented to them. The “fat pitch”, which by the way could take years before you get one.
There was also a great interview with Charlie Munger, where he expands on this topic
“The opportunities that were important that were going to come to me were few and that the trick was to prepare myself for seizing the few that came.”
Charlie Munger
Most of the opportunities available in the public markets are not accessible to the average person.
Which is why index funds are so popular, they are an appropriate choice for the average investor. You simply need a place to allocate your excess savings to preserve the purchasing power of your savings and get a bit of growth.
For the average person the important opportunities would come from things like:
- Getting that accreditation that can boost your salary by 15%, and then doing then next one, and the next one
- The general manager of the local landscaping company buying out his boss and growing the business
- Knowing the value of every home within a zip code, buying right and staying on budget with renos and extracting value
Investing in things you have control over and confidence in the outcome from specialized knowledge are the opportunities that matter.
If everyone knew about these opportunities and they required no specialized skill or knowledge to execute they wouldn’t be great opportunities.