Value Investors Know The Dangers Of Reacting To Short-term Volatility

Value Investors Know The Dangers Of Reacting To Short-term Volatility Via George Athanassakos, The Globe And Mail

Finance academics define risk as volatility, whereas value investors see risk as the probability that adverse outcomes in the future will permanently impair the business’s potential cash flow and investor’s capital. Which is correct? It all depends on your investment horizon. But if maximizing terminal wealth is of importance to investors, and it is difficult to argue otherwise, then value investors have it right.

Let me explain.

There are two types of fundamental analysts: short-term and long-term. Short-term fundamental analysts are the typical financial analysts. They accept the stock price as given and try to determine what will make the stock price move....