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Buying individual stocks is a poor investment strategy. One reason is that we're naturally drawn to the wrong ones.
Investors rarely buy a spreadsheet. They buy a story.
New factories. Bold acquisitions. A firm building an empire at speed. It feels like the kind of company that will deliver.
But fast expansion is not the same as productive spending. Work on the investment factor, including research by Eugene Fama and Kenneth French, suggests that companies with very high asset growth have tended to underperform. The effect is clearest among smaller companies, where heavy investment often sits alongside weak profits.
As this video explains, it's not the most important factor. Market risk comes first, then value, size and profitability. But investment earns its place in the queue.
#Stocks #Equities #Investing #EvidenceBasedInvesting
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