The Synopsis Article. What is a Fair Investment Assumption?
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Dec 13, 2024 Dive into the intriguing world of fair investment assumptions! Explore various perspectives from financial pros urging a balanced approach. Discover how uncertainty from Claude Shannon's theory shapes investment strategies. Learn the art of a strong investment thesis and how personal biases can cloud judgment. Investigate the 'turkey problem' to avoid historical misinterpretations. Finally, gain insights into crafting clear and simple investment theses for smarter decisions.
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Beware Thesis Shift
- Modified investment theses often have a higher probability of being wrong.
- Avoid "thesis shift," where you reformulate your thesis to fit new, disconfirming evidence.
Information and Uncertainty
- Information in investing isn't just about meaning but about eliminating alternative possibilities.
- More specific details reduce misinterpretations, yet uncertainty is desirable in investment theses.
Hedge Fund vs. Long-Only
- A hedge fund analyst predicts strong retailer sales exceeding $125 million.
- A long-only investor expects sales of at least $100 million, allowing for more uncertainty.