If You Want to See More About John T. Reed....
 

Go to the real estate forums at CREonline.com, enter his name into the search field and you will get literaly hundreds of results

You'll find that for the most part, he's considered to be a joke in creative real estate circles!




Creative Real Estate Online

Re: If You Want to See More About John T. Reed....
 

Yes, but the reason for that is because the people who frequent that forum are mostly Carleton Sheets/William J. McCorkle/Tom Vu dreamers.

> Go to the real estate forums at
> CREonline.com, enter his name into the
> search field and you will get literaly
> hundreds of results

> You'll find that for the most part, he's
> considered to be a joke in creative real
> estate circles!

Re: If You Want to See More About John T. Reed....
 

Adam,
You obviously have never frequented the main CREonline forum.

> Yes, but the reason for that is because the
> people who frequent that forum are mostly
> Carleton Sheets/William J. McCorkle/Tom Vu
> dreamers.

Re: If You Want to See More About John T. Reed....
 

Adam -

> Yes, but the reason for that is because the
> people who frequent that forum are mostly
> Carleton Sheets/William J. McCorkle/Tom Vu
> dreamers.

I've known you and respected your posts in several forums for a number of years. This statement is out of character for you. And it's simply not true. Creonline has a *number* of forums. Yes. There is a Carleton Sheets forum. And we both know that McCorkle and Vu were crooks. As you probably know, McCorkle is serving time in federal prison for his crimes. And I don't know what Vu is doing these days.

In any case, that's an unfair stereotyping and characterization of those who visit Creonline. I will agree that there are dreamers on there who seem to be scared of doing their first deal. But there are plenty of others who are making it happen using creative real estate techniques.

Let's also set Mr. Reed in the correct light. Dien Rice already pointed this out but I'd like to amplify it a bit more. John T. Reed blasts 90 - 95% of the "gurus" in real estate. Let's compare Mr. Reed's information with one of those he blasts, Ron LeGrand.

Reed says LeGrand is basically a huckster selling "get-rich-quick" stuff. Yet I've met a number of people who are reproducing Ron's techniques regularly. There are many of them in my area. Mr. Reed has done 11 real estate deals. Ron LeGrand has done 1400+. And, as Dien pointed out, Reed sells his own real estate materials.

I've met Ron LeGrand. He's a down to earth guy whose making money teaching his system to others. What's wrong with that? BTW, it might interest you to know that Ron LeGrand does *not* blast others in the real estate training business. He speaks well of many of them and has them at some of his events.

I've also invested in LeGrand's materials. I find good information based on solid principles in them. I may purhcase Sheets information to compare. I don't know yet.

Now, who should I buy information from? A guy who has done 11 real estate deals (I know a couple in this area who did *nine deals in ONE MONTH*) and blasts almost everybody but himself, or a guy who has done 1400+ deals and is showing others who to do it?

Rick Smith, "The Net Guerrilla"


Click to Get Your Free Course On How to Get a Great Life in 10 Days

It Says a Lot About John T. Reed's Character...
 

Anybody who publicly trashes their competition in the guise of a "Guru Review"then turns around and tries to sell you their own book on a subject they obviously know nothing about has very little credibility in my opinion.
Like you said .... Reed has done a total of 11 RE deals in his life while the people he blasts like LeGrand, Bronchick, Kaiser etc.... do this many in a month.

> Adam -

> I've known you and respected your posts in
> several forums for a number of years. This
> statement is out of character for you. And
> it's simply not true. Creonline has a
> *number* of forums. Yes. There is a Carleton
> Sheets forum. And we both know that McCorkle
> and Vu were crooks. As you probably know,
> McCorkle is serving time in federal prison
> for his crimes. And I don't know what Vu is
> doing these days.

> In any case, that's an unfair stereotyping
> and characterization of those who visit
> Creonline. I will agree that there are
> dreamers on there who seem to be scared of
> doing their first deal. But there are plenty
> of others who are making it happen using
> creative real estate techniques.

> Let's also set Mr. Reed in the correct
> light. Dien Rice already pointed this out
> but I'd like to amplify it a bit more. John
> T. Reed blasts 90 - 95% of the
> "gurus" in real estate. Let's
> compare Mr. Reed's information with one of
> those he blasts, Ron LeGrand.

> Reed says LeGrand is basically a huckster
> selling "get-rich-quick" stuff.
> Yet I've met a number of people who are
> reproducing Ron's techniques regularly.
> There are many of them in my area. Mr. Reed
> has done 11 real estate deals. Ron LeGrand
> has done 1400+. And, as Dien pointed out,
> Reed sells his own real estate materials.

> I've met Ron LeGrand. He's a down to earth
> guy whose making money teaching his system
> to others. What's wrong with that? BTW, it
> might interest you to know that Ron LeGrand
> does *not* blast others in the real estate
> training business. He speaks well of many of
> them and has them at some of his events.

> I've also invested in LeGrand's materials. I
> find good information based on solid
> principles in them. I may purhcase Sheets
> information to compare. I don't know yet.

> Now, who should I buy information from? A
> guy who has done 11 real estate deals (I
> know a couple in this area who did *nine
> deals in ONE MONTH*) and blasts almost
> everybody but himself, or a guy who has done
> 1400+ deals and is showing others who to do
> it?

> Rick Smith, "The Net Guerrilla"

Re: If You Want to See More About John T. Reed....
 

Wow, hard decision. The one who has done 11 deals or the one who has done over 1400!

> Now, who should I buy information from? A
> guy who has done 11 real estate deals (I
> know a couple in this area who did *nine
> deals in ONE MONTH*) and blasts almost
> everybody but himself, or a guy who has done
> 1400+ deals and is showing others who to do
> it?

> Rick Smith, "The Net Guerrilla"

Re: If You Want to See More About John T. Reed....
 

You are correct. My apologies.

I just went back to the forum, and yes... I agree with you... it doesn't seem as pie-in-the-sky as it seemed originally seemed. Although with the millions and millions that can be made from real estate investing, I still question why they would endorse the likes of Carleton Sheets and other gurus who apparently make more money from infomercials and seminars than from investing.

On an unrelated note: I think that there is a tendency for my writing style to be misinterpreted as confrontational. I think that this is a by-product of the limitations of typed/written correspondence and the lack of vocal tonation. So, please (everyone here in this forum) don't take any of this personal.

As for JTR... the assertion that he's just a cranky old man who blasts everyone else in order to sell his stuff, is just bunk. There ARE MANY people (besides himself) who he praises:

- Bob Bruss
- CCIM Courses
- George F. Coats
- Jay P. DeCima
- Gary DiGrazia
- Joe Dominquez
- Jane Garvey
- IREM courses
- MAI courses
- Bill Mencarow
- Kevin Meyers
- Bill Nickerson
- Jon Richards
- Leigh Robinson
- Al Seastrand
- John Schaub
- Lonnie Scruggs
- Bill Tappan
- Jeffrey Taylor

So, the assertion that he needs to blast everyone else to sell his stuff is nonsense.

I mentioned that he had only owned 11 properties. My mistake, again. I don't know where I thought I remembered reading this, but here are the facts about the real estate owned:

Total rental units owned: 117
Total houses owned: 3

Maybe the total number of properties still comes to 11, but owning 117 units is still nothing to sneeze at.

So, is he 'on the mark' 100% of the time? Perhaps not. (But I think he is, in regards to RK).

His B.S. detector list is itself a bunch of B.S. He singles out the use of direct response marketing techniques as indicators of whether someone is a b.s. artist. And of course, this is nonsense.

Regarding the criticism of him owning a limited number of properties, if I remember correctly, he's owned more than Carleton Sheets owned. Regardless... I think that the issue should be:

Are the points that he is making about RK valid, regardless of his motivation?

Thank you,
- Adam.

Re: If You Want to See More About John T. Reed....
 

I know a guy who writes excellent movie reviews. He's always right on target.

But when it comes to writing op/ed pieces, he's a moron.

My point? We were just discussing JTR's review of RK. I don't know anything about the rest.

My other point was that: Some are trying to discredit him because his supposed goal is to bash everyone else in order to sell his stuff... is false. (Reference post, above). He recommends many authors and lecturers.

- Adam.


Get your dog to listen to you, anywhere you go!

About Those 117 Units That Reed Owned...
 

It was an apartment complex that he lost through foreclosure in the 1980's.

A real "Guru" in action!

> You are correct. My apologies.

> I just went back to the forum, and yes... I
> agree with you... it doesn't seem as
> pie-in-the-sky as it seemed originally
> seemed. Although with the millions and
> millions that can be made from real estate
> investing, I still question why they would
> endorse the likes of Carleton Sheets and
> other gurus who apparently make more money
> from infomercials and seminars than from
> investing.

> On an unrelated note: I think that there is
> a tendency for my writing style to be
> misinterpreted as confrontational. I think
> that this is a by-product of the limitations
> of typed/written correspondence and the lack
> of vocal tonation. So, please (everyone here
> in this forum) don't take any of this
> personal.

> As for JTR... the assertion that he's just a
> cranky old man who blasts everyone else in
> order to sell his stuff, is just bunk. There
> ARE MANY people (besides himself) who he
> praises:

> - Bob Bruss
> - CCIM Courses
> - George F. Coats
> - Jay P. DeCima
> - Gary DiGrazia
> - Joe Dominquez
> - Jane Garvey
> - IREM courses
> - MAI courses
> - Bill Mencarow
> - Kevin Meyers
> - Bill Nickerson
> - Jon Richards
> - Leigh Robinson
> - Al Seastrand
> - John Schaub
> - Lonnie Scruggs
> - Bill Tappan
> - Jeffrey Taylor

> So, the assertion that he needs to blast
> everyone else to sell his stuff is nonsense.

> I mentioned that he had only owned 11
> properties. My mistake, again. I don't know
> where I thought I remembered reading this,
> but here are the facts about the real estate
> owned:

> Total rental units owned: 117
> Total houses owned: 3

> Maybe the total number of properties still
> comes to 11, but owning 117 units is still
> nothing to sneeze at.

> So, is he 'on the mark' 100% of the time?
> Perhaps not. (But I think he is, in regards
> to RK).

> His B.S. detector list is itself a bunch of
> B.S. He singles out the use of direct
> response marketing techniques as indicators
> of whether someone is a b.s. artist. And of
> course, this is nonsense.

> Regarding the criticism of him owning a
> limited number of properties, if I remember
> correctly, he's owned more than Carleton
> Sheets owned. Regardless... I think that the
> issue should be:

> Are the points that he is making about RK
> valid, regardless of his motivation?

> Thank you,
> - Adam.

Where Does CREOnline Endorse Carleton Sheets?
 

All they do is have a Sheets forum to free up the main forum from endless newbie questions of "Does Carleton Sheets work"?

You really need to pay closer attention Mr. Katz.
Remember, comprehension is your friend.

, I still question why they would
> endorse the likes of Carleton Sheets and
> other gurus who apparently make more money
> from infomercials and seminars than from
> investing.

Re: If You Want to See More About John T. Reed....
 

Adam -

> I just went back to the forum, and yes... I
> agree with you... it doesn't seem as
> pie-in-the-sky as it seemed originally
> seemed. Although with the millions and
> millions that can be made from real estate
> investing, I still question why they would
> endorse the likes of Carleton Sheets and
> other gurus who apparently make more money
> from infomercials and seminars than from
> investing.

I don't know why Creonline has a forum specific to Carleton Sheets. I will say this. Ron LeGrand is still doing deals today. He has slowed down but still does several deals per month. The people on his hotline are active investors. His CEO is an active investor. I don't know about the other "gurus." LeGrand is the only one that I have this information on.

> On an unrelated note: I think that there is
> a tendency for my writing style to be
> misinterpreted as confrontational. I think
> that this is a by-product of the limitations
> of typed/written correspondence and the lack
> of vocal tonation. So, please (everyone here
> in this forum) don't take any of this
> personal.

I never took the post as confrontational or personal. But then like I said, I know your style from several years of posting on various forums. Your last post seemed out of character for you. That's why I was a bit surprised.

> As for JTR... the assertion that he's just a
> cranky old man who blasts everyone else in
> order to sell his stuff, is just bunk. There
> ARE MANY people (besides himself) who he
> praises:

Now it's my turn to apologize. I painted my statement with too broad a brush. I knew that there were some that he praised. I characterized that unfairly.

> - Bob Bruss
> - CCIM Courses
> - George F. Coats
> - Jay P. DeCima
> - Gary DiGrazia
> - Joe Dominquez
> - Jane Garvey
> - IREM courses
> - MAI courses
> - Bill Mencarow
> - Kevin Meyers
> - Bill Nickerson
> - Jon Richards
> - Leigh Robinson
> - Al Seastrand
> - John Schaub
> - Lonnie Scruggs
> - Bill Tappan
> - Jeffrey Taylor

Some are these folks are names that people *might* know. Many are not. For example, how many people know that Bill Nickerson was one the pioneers in creative real estate? Lonnie Scruggs is considered the king of mobile homes. Jeff Taylor is considered one of the experts on tenants. My point is this. Of those on the list that Reed *approves of* or praises, how many are names that anybody beyond those that have taken the time to find out, (such as yourself), who they are? Why does he approve of them as opposed to those who run seminars and/or infomercials or are among the more well known names? Is it because they don't run seminars and infomercials? Has he bought their stuff and reviewed it or compared it with the others? Or has he rejected it out of hand because he thinks the sales material of the "gurus" is hype? I honestly don't know what his criteria are for making his picks and pans.

> So, the assertion that he needs to blast
> everyone else to sell his stuff is nonsense.

See above.

> I mentioned that he had only owned 11
> properties. My mistake, again. I don't know
> where I thought I remembered reading this,
> but here are the facts about the real estate
> owned:
> Total rental units owned: 117
> Total houses owned: 3
> Maybe the total number of properties still
> comes to 11, but owning 117 units is still
> nothing to sneeze at.

I don't disagree. 117 units is *not* something to sneeze at whether it was individual SFRs, (single family residences), or apartments. But his 117 units still simply pales in comparison to Ron LeGrand's 1400+ properties. My point here is not to say "LeGrand has more marbles than Reed." My point here is to say that I'm more inclined to listen to someone who has students doing as many deals in a year as Reed has done in his career. Like I said, I know of one couple in my area that did 9 house deals in May. They've done more since, (although I don't know how many). My wife and I are taking them to dinner next week. BTW, they're *youngsters* *g*. The guy is 27 and the girl is 22. Neither has ever held a *real* job. *g* But I can obviously learn some things from them and that's *exactly* what I plan to do.

> So, is he 'on the mark' 100% of the time?
> Perhaps not. (But I think he is, in regards
> to RK).

AFA RK's real estate deals, I have no idea how many he has done. AFA how many Dolf DeRoos has done, I have no clue.

> His B.S. detector list is itself a bunch of
> B.S. He singles out the use of direct
> response marketing techniques as indicators
> of whether someone is a b.s. artist. And of
> course, this is nonsense.

*Precisely*. I think this is probably the central theme to his BS detector list. If I remember correctly, there were others on his list besides people involved with CRE. Robert Allen, (who of course started in CRE), comes to mind.

> Regarding the criticism of him owning a
> limited number of properties, if I remember
> correctly, he's owned more than Carleton
> Sheets owned.

Could be. I don't know about that.

> Regardless... I think that the
> issue should be:

> Are the points that he is making about RK
> valid, regardless of his motivation?

Well, I'm having a hard time separating his points from his motivation because I still think his motivation is highly suspect. But let's see if I can do that.

Do I have some RK stuff in my library? Yup. Do I think it's all fantastic? Nope. (Actually, I only kept the good ones.*g*) As you said, (maybe it wasn't you), several of the books were puffery and repeated the same thing over and over. I think the best one was "RD's Guide to Investing." And I'm pleased with "Choose to Be Rich" which is an audio program with a workbook. There's quite a bit of meat in there. (But you have to skip the first few tapes because they rehash what you already know if you know anything about RD.) "Loopholes of the Rich" by Diane Kennedy isn't bad either. I've looked at the books by the other members of "The Team." It seemed to me that several of them were more interested in selling their own services through the books than providing useful information.

And there are certain parts of what RK talks about that I don't necessarily agree with. But just because John T. Reed thinks the principles don't work for whatever reason, does that make them any less true? Of course not. For example, J.T. Reed says he has a Ph.D. and that RK graduated from the Merchant Marine Academy. So what? That and 50 cents will get you a soda. How does that make RK any less credible? AFAIK, the Merchant Marine Academy is considered to be a valid academy on par with the Naval Academy and the others. The difference is that you're a civilian when you leave there and not an officer as in the others. However, you *can* accept a commission in the service which was what RK later did with the Marine Corps. I realize that this is only one part of it but it highlights in my mind the kind of stuff that Reed thinks is important that isn't. Do RK's principles work? Well, I think that many of them make sense. I know people using them. I have plans to try them myself.

Let me put it this way. Like Dien said earlier, what it boils down to is picking out the best parts and throwing out the rest.

Sorry to be so long winded. Just my take on all of this.

Rick Smith, "The Net Guerrilla"


Click Here to Get Your Free Course On Getting a Great Life In 10 Days

Re: Where Does CREOnline Endorse Carleton Sheets?
 

Pam -

> All they do is have a Sheets forum to free
> up the main forum from endless newbie
> questions of "Does Carleton Sheets
> work"?

Some might consider this an endorsement. I don't but others might.

> You really need to pay closer attention Mr.
> Katz. Remember, comprehension is your friend.

Hmmm. I think *that* was a little unfair. Adam has been a contributing member of many marketing forums for many years and he was simply posting his opinion.

I, (and others), disagreed with his opinion and said so. Adam, being who he is, went back and reviewed the forum to see what was up. He then posted a correction to his earlier post. Not many people have the guts to do that these days, online or off.

And while I may disagree with some of Adam's opinions in this case, I will defend to the death his right to say it. (Or something like that. I probably misquoted that badly.) His posting had *nothing* to do with his powers of observation. He was simply stating his opinion.

Rick Smith, "The Net Guerrilla"

Re: If You Want to See More About John T. Reed....
 

Rick,

Thanks for the tip on the LeGrand stuff. I'll check out some of his material. I'm definitely in the market for some good real estate investing material, as I'm looking to purchase my second rental property, soon. (Seems a lot safer than Enron stock!)

Regarding JTR on RK, yes... the issues about what school he went to come across as petty.

But other issues he brings up are legitimate.

If you goto:
http://www.johntreed.com/Kiyosaki.html

and read the table, about half-way down the page where it says, "There is a lot of incorrect conventional wisdom in this book." I think you'll find that a lot of his criticisms actually do have merit.

- Adam.


Browning Direct

If You Want to Learn The Real Estate Game
 

Adam,

A friend loaned me his Carlon Sheets course about 5 years ago. At the time, I knew nothing about real estate. I learned enough from Carlton's materials to be able to buy my first house.

Then, about 6 months ago, a friend and I bought some Ron LeGrand materials. Very good stuff, BUT...

In my opinion, the VERY BEST way to learn real estate is to first get some basic RE books and get a grounding in the basic principles. And at the same time, go to the CREonline main forum daily (that's what I've been doing --- and I've learned volumes there). There ARE lots of newbie questions, yes, and that's actually GREAT, because there are many seasoned investors there who give accurate, caring advice that quickly builds one's RE knowledge base.

Try it, and you'll see...if you want to learn the RE game, spend a few days at the forum, learn who the good-guy posters are, and I guarantee you'll REALLY appreciate that site in short order.

http://

---- Hugh




CREONLINE MAIN FORUM

Re: If You Want to Learn The Real Estate Game
 

Hugh,
A lot of people who allow others like John Reed to tell them how they should think bash Carleton sheets but like you said the course he sells is more than enough to buy your first house with no money down.
I bought the course about three years ago and within 6 months bought 2 properties using the information contained in the Sheets course.
Some people would rather listen to a failed RE investor like Reed than see for themselves though.

Your assesment of Creonline.com is correct also. An excellent site. Reed doesn't like them either though!

Gary Turney

> Adam,

> A friend loaned me his Carlon Sheets course
> about 5 years ago. At the time, I knew
> nothing about real estate. I learned enough
> from Carlton's materials to be able to buy
> my first house.

> Then, about 6 months ago, a friend and I
> bought some Ron LeGrand materials. Very good
> stuff, BUT...

> In my opinion, the VERY BEST way to learn
> real estate is to first get some basic RE
> books and get a grounding in the basic
> principles. And at the same time, go to the
> CREonline main forum daily (that's what I've
> been doing --- and I've learned volumes
> there). There ARE lots of newbie questions,
> yes, and that's actually GREAT, because
> there are many seasoned investors there who
> give accurate, caring advice that quickly
> builds one's RE knowledge base.

> Try it, and you'll see...if you want to
> learn the RE game, spend a few days at the
> forum, learn who the good-guy posters are,
> and I guarantee you'll REALLY appreciate
> that site in short order.

> http://

> ---- Hugh

Re: If You Want to Learn The Real Estate Game
 

Cool.

Thanks for the tip.

- Adam.


Browning Direct

LOL!!! John T. Reed!
 

That guy is the best known joke on the internet!
He failed in real estate investing in the 80's so he's now bitter and bashes everyone who is a sucess at it.

I didn't think anyone took HIM seriously! LOL!

> I know a guy who writes excellent movie
> reviews. He's always right on target.

> But when it comes to writing op/ed pieces,
> he's a moron.

> My point? We were just discussing JTR's
> review of RK. I don't know anything about
> the rest.

> My other point was that: Some are trying to
> discredit him because his supposed goal is
> to bash everyone else in order to sell his
> stuff... is false. (Reference post, above).
> He recommends many authors and lecturers.

> - Adam.

Re: If You Want to See More About John T. Reed....
 

Adam -

> Thanks for the tip on the LeGrand stuff.
> I'll check out some of his material.

Of course he's not the only one but he ranks up there with the best, IMO. Go to http://www.cashflowgenerator.com to check out his basic package. I think they're selling it for $49.95 right now. I have it. There's good info in there. 'Course you might be beyond that. If so, go to http://www.sdiwealthinstitute.com.

> I'm definitely in the market for some good real
> estate investing material, as I'm looking to
> purchase my second rental property, soon.
> (Seems a lot safer than Enron stock!)

Excellent. And pretty much *anything* is safer than the market right now. Dien might disagree with me on that but there was an article in today's paper about how even the buy and hold people are questioning that strategy.

> If you goto:
> http://www.johntreed.com/Kiyosaki.html and
> read the table, about half-way down the page
> where it says, "There is a lot of
> incorrect conventional wisdom in this
> book." I think you'll find that a lot
> of his criticisms actually do have merit.

It's been awhile since I read Reed's review. I probably should go back and re-read it. But ever since I figured out what his motivation appeared to be, I've dismissed him.

Rick Smith, "The Net Guerrilla"


Click Here to Get Your Free E-Course on Getting a Great Life in 10 Days

Try E-Bay For Ron LeGrand Courses
 

Awhile back I picked up a his Lease/Option course for $200. About 1/3 of what it costs new.
If there aren't any of his courses at E-Bay one day, check back the next day and the next for a couple of weeks and you will find at least 5 or 6 in that time period.

> Adam -

> Of course he's not the only one but he ranks
> up there with the best, IMO. Go to
> http://www.cashflowgenerator.com to check
> out his basic package. I think they're
> selling it for $49.95 right now. I have it.
> There's good info in there. 'Course you
> might be beyond that. If so, go to
> http://www.sdiwealthinstitute.com .

> Excellent. And pretty much *anything* is
> safer than the market right now. Dien might
> disagree with me on that but there was an
> article in today's paper about how even the
> buy and hold people are questioning that
> strategy.

> It's been awhile since I read Reed's review.
> I probably should go back and re-read it.
> But ever since I figured out what his
> motivation appeared to be, I've dismissed
> him.

> Rick Smith, "The Net Guerrilla"

Buy and Hold vs Short-Term Trade
 

Rick,

> Excellent. And pretty much *anything* is
> safer than the market right now. Dien might
> disagree with me on that but there was an
> article in today's paper about how even the
> buy and hold people are questioning that
> strategy.

I've been doing a little thinking lately about how markets operate, and I thought I'd share my current opinion. It highlights what I consider to be the major difference between buy and hold strategies and trading strategies.

Assume for a moment that there is some real "fundamental" value for a company. This value is the present value of the company's cash flows that you would be entitled to if you owned the entire company.

Now what links this theoretical "value" to the actual market "price" is the possibility that somebody *could* buy the company and realise those cash flows.. Without that possibility, I'm not sure why there'd be such a linkage.

Having said that, you then need to look at how prices work. We all know stock prices move around a lot, and some have suggested they are just random fluctuations.

I believe they're the combined result of a lot of different market participants with different strategies, opinions, and outlooks, the day-to-day price is based on these.

Now, unlike fundamentals, which are usually reasonably steady, people's opinions about the future can change somewhat, causing stock prices to move substantially over short periods of time.

The price should still be somewhat *around* the fundamental value, however, though diversions above this value can happen for quite some time (see dot com boom). Diversions below the value are less likely, for someone with a lot of money (or another company) can take it over to align the two -- I'm not aware of any equivelant possibility for an overvalued company.

So, now that we have that established... Let's look at different time horizons.

If you have a buy-and-hold strategy of 5 or 10 years with a high growth company, you're essentially betting the fundamental value of the company will increase over that period. And the idea is... Over this period, the variation due to short-term speculation and opinions will be much less than the increase due to the increase in fundamental value.

So for example, let's say a company's VALUE is $50 today, but it is PRICED at $60. A buy and hold strategy might assume that in 5 years time, it would be VALUED at $125, even though it might be PRICED from $110 - $160. The $ difference between value and price is smaller compared to the difference between the two values over the period.

Contrast this with a short-term trading strategy, which really is looking at changes in market expectations.

If you buy something for a whole 2 weeks, for example, the fundamental value of a company is likely to remain unchanged, but the market outlook for the company can change drastically, causing large changes in prices.

Thus most of your return (or loss) comes from the market mentality, not the fundamentals.

So what's the difference in risk?

The difference is... Buy and hold strategies are primarily betting on what changes about the company's fundamental prospects, and trading strategies are bets on market opinions.

What's better? In my opinion, the best strategy is one that utilises both methods.

If you're a long-term investor, probably the buy and hold method is more relevant (and less risky) for you... But that's just my opinion.

Just don't make the mistake of relying solely on buy-and-hold if you're using margin loans or short selling. If you use your own cash to buy, then what the market does short-term is irrelevant... But if you use leverage, it can increase your returns, but suddenly you need to care about what the market does in the short-term, so trading considerations come into the picture.

Best Regards,

Thomas Rice.

Idea: combine "buy and hold" with chatteling [DNO]
 

dno
> Rick,

> I've been doing a little thinking lately
> about how markets operate, and I thought I'd
> share my current opinion. It highlights what
> I consider to be the major difference
> between buy and hold strategies and trading
> strategies.

> Assume for a moment that there is some real
> "fundamental" value for a company.
> This value is the present value of the
> company's cash flows that you would be
> entitled to if you owned the entire company.

> Now what links this theoretical
> "value" to the actual market
> "price" is the possibility that
> somebody *could* buy the company and realise
> those cash flows.. Without that possibility,
> I'm not sure why there'd be such a linkage.

> Having said that, you then need to look at
> how prices work. We all know stock prices
> move around a lot, and some have suggested
> they are just random fluctuations.

> I believe they're the combined result of a
> lot of different market participants with
> different strategies, opinions, and
> outlooks, the day-to-day price is based on
> these.

> Now, unlike fundamentals, which are usually
> reasonably steady, people's opinions about
> the future can change somewhat, causing
> stock prices to move substantially over
> short periods of time.

> The price should still be somewhat *around*
> the fundamental value, however, though
> diversions above this value can happen for
> quite some time (see dot com boom).
> Diversions below the value are less likely,
> for someone with a lot of money (or another
> company) can take it over to align the two
> -- I'm not aware of any equivelant
> possibility for an overvalued company.

> So, now that we have that established...
> Let's look at different time horizons.

> If you have a buy-and-hold strategy of 5 or
> 10 years with a high growth company, you're
> essentially betting the fundamental value of
> the company will increase over that period.
> And the idea is... Over this period, the
> variation due to short-term speculation and
> opinions will be much less than the increase
> due to the increase in fundamental value.

> So for example, let's say a company's VALUE
> is $50 today, but it is PRICED at $60. A buy
> and hold strategy might assume that in 5
> years time, it would be VALUED at $125, even
> though it might be PRICED from $110 - $160.
> The $ difference between value and price is
> smaller compared to the difference between
> the two values over the period.

> Contrast this with a short-term trading
> strategy, which really is looking at changes
> in market expectations.

> If you buy something for a whole 2 weeks,
> for example, the fundamental value of a
> company is likely to remain unchanged, but
> the market outlook for the company can
> change drastically, causing large changes in
> prices.

> Thus most of your return (or loss) comes
> from the market mentality, not the
> fundamentals.

> So what's the difference in risk?

> The difference is... Buy and hold strategies
> are primarily betting on what changes about
> the company's fundamental prospects, and
> trading strategies are bets on market
> opinions.

> What's better? In my opinion, the best
> strategy is one that utilises both methods.

> If you're a long-term investor, probably the
> buy and hold method is more relevant (and
> less risky) for you... But that's just my
> opinion.

> Just don't make the mistake of relying
> solely on buy-and-hold if you're using
> margin loans or short selling. If you use
> your own cash to buy, then what the market
> does short-term is irrelevant... But if you
> use leverage, it can increase your returns,
> but suddenly you need to care about what the
> market does in the short-term, so trading
> considerations come into the picture.

> Best Regards,

> Thomas Rice.