On Investing…

“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right” – Warren Buffett

What stands out, perhaps more than anything else, about Warren Buffett are a set of principles that are well tested and tried. Principles that he sticks to which are unwavering in the light of market opinion. Not because the market says so, but because of the data and reasoning that supports this view.

The market may disagree and sell a particular stock short – although a short-sighted opinion. This is where the well seasoned professional can identify value. A stock that’s worth $30 a share, but is selling for, say, $20 may well represent excellent value.

I believe the same principles go for the well seasoned sports punter as it does for the investor. A winning chance (which is backed by sound data and reasoning) may be valued at $4.00, a 25% (or 3/1) chance. Now, let’s say the market’s opinion of this ‘chance’ is $7.00 (or 6/1). In effect the market overall is saying it should come in around 14% of the time.

It stands to reason that providing your data supports your view of a ‘25% chance’ accurately enough you can expect to make money over the long run.

Of course you wouldn’t stake 100% of your capital on a certain 25% chance, would you? Nor would you wager 25% of your bankroll to a certain 25% chance?

For more on this have a look at: ‘Calculating your edge’, and ‘Winning and Losing Streaks’

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