The Eight Principles of Value Investing
We are deluged with information. Richard Saul Wurman, the godfather of information architecture, calculated that there is more information in a single issue of the New York Times than the average citizen in the 17th century would have been exposed to in his or her lifetime. And that calculation doesn’t even take into account the explosion of information available through new technology. The issue is particularly acute for investors, who can access up-to-the-minute stock quotes on their iPhones, check the value of their portfolios on an iPad and choose from a multitude of television shows, magazines and newspapers to bathe in the information stream of financial markets, economics and politics.
Shortage of information isn’t the problem: shortage of insight is.
Recent events have not provided any relief from this malady. Fiscal cliffs, debt ceilings, European crises, market volatility, political dysfunction and more have competed for investors’ attention, making it increasingly difficult to glean meaning from a cacophony of headlines. This distinctly modern challenge is known as information overload, a condition in which too much information obscures what is genuinely important. Information overload can lead to the inclination to react to each and every new data release or, at the opposite extreme, to do nothing and succumb to paralysis. Clay Shirky, a thinker and writer on the role of technology in society, claims that there is no such thing as information overload — only filter failure.
So what filters should investors have in place to enable them to hear the signal through the noise and not be distracted to their own detriment?
Keep reading: The Eight Principles of Value Investing.
