Big Mistakes Book Summary - Big Mistakes Book explained in key points
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Big Mistakes summary

Michael Batnick

The Best Investors and Their Worst Investments

4.5 (62 ratings)
26 mins

Brief summary

Big Mistakes by Michael Batnick is a book about learning from investing mistakes, exploring the reasons behind them & how to avoid them in the future.

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    Big Mistakes
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    In investment, methods and techniques are useful but not infallible.

    Humans naturally seek explanations for events in the world; neat little rules and tidy formulas that package things up into clear explanations. Unfortunately, the world is far too complex for this to really work – and as the legendary investor Benjamin Graham demonstrated, this is particularly true with investment.

    Graham had a wildly successful financial career and authored the most influential investment book of all time: The Intelligent Investor, which was deemed “the best book on investing ever written” by the legendary Warren Buffett. But Graham’s most important act was pioneering a powerful new financial technique called value investing.

    And at the heart of this concept is Graham’s observation that the price of a company fluctuates more than its value. This means that the cost of a company’s shares – its price – often doesn’t reflect the company’s value, which is a combination of things like revenue, assets and future potential.

    So, why this difference between price and value?

    Well, it’s because humans set prices while businesses set values – and because humans are more fickle and emotional than businesses, price and value can vary considerably. For example, when Graham watched General Electric’s valuation plummet from $1.87 billion to $784 million in the 1930s, he noted that nothing disastrous had happened to the company’s assets, employees or revenue that year – it was simply investor optimism and pessimism driving these changes.

    But even Benjamin Graham couldn’t concoct a market-beating formula, and his philosophy almost ruined him during the Great Depression. After watching prices skyrocket during the 1920s, he sensed that prices and value were way out of sync. So, he decided to bet against the market, predicting prices would fall. And he was right – except he misjudged the extent of the fall.

    By 1930, the stock market had taken a beating. Assuming that the worst was over, Graham began to invest heavily once again. But prices kept falling, and the market wouldn’t truly bottom out until 1932; by that time, Graham’s portfolio had lost 70 percent of its value.

    Experiences like Graham’s prove there are no iron-clad laws in investing, and certainly no magic formula. Being aware of value is critical, but don’t be a slave to it. Cheap can always get cheaper.

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    What is Big Mistakes about?

    In Big Mistakes (2018)Michael Batnick runs through some of the world’s best-known investors and their high-profile slipups. More than just a catalog of blunders, this book also explains what each error can teach us about managing our own portfolios.

    Big Mistakes Review

    Big Mistakes (2018) by Michael Batnick explores the biggest financial mistakes made by famous investors. Here are three reasons why this book is worth reading:

    • It provides valuable insights into the investing world, allowing readers to learn from the failures of others and avoid making similar mistakes.
    • The book combines tangible examples, historical context, and analytical research, giving a comprehensive overview of the impact of these mistakes on the market.
    • With its accessible language and engaging storytelling, the book successfully captivates the reader, making it an enjoyable and informative read.

    Who should read Big Mistakes?

    • Fledgling investors
    • Those fascinated by great investors
    • People interested in US investment history

    About the Author

    Michael Batnick is the Director of Research at Ritholtz Wealth Management. He also writes the popular blog, The Irrelevant Investor, and coproduces the podcast Animal Spirits.

    © Michael Batnick: Big Mistakes copyright 2018, John Wiley & Sons Inc. Used by permission of John Wiley & Sons Inc. and shall not be made available to any unauthorized third parties.

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    Big Mistakes FAQs 

    What is the main message of Big Mistakes?

    Learn from the biggest mistakes in history to avoid repeating them.

    How long does it take to read Big Mistakes?

    The reading time for Big Mistakes varies, but you can read the Blinkist summary in just 15 minutes.

    Is Big Mistakes a good book? Is it worth reading?

    Big Mistakes is a valuable read that offers insights into the costly errors made by influential figures.

    Who is the author of Big Mistakes?

    Michael Batnick is the author of Big Mistakes.

    What to read after Big Mistakes?

    If you're wondering what to read next after Big Mistakes, here are some recommendations we suggest:
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    • 7 Strategies for Wealth & Happiness by Jim Rohn
    • The Algebra of Wealth by Scott Galloway
    • Mastering the Market Cycle by Howard Marks
    • The Intelligent Investor by Benjamin Graham and comments by Jason Zweig
    • Rich Dad, Poor Dad by Robert T. Kiyosaki
    • The Behavioral Investor by Daniel Crosby
    • The Little Book of Market Wizards by Jack D. Schwager