Aswath Damodaran: Greed Kills The Best Investing Strategies

In his latest interview on the Brave New World Podcast, Aswath Damodaran explains why greed kills the best investing strategies. Here’s an excerpt from the interview:

I tell people, look I expect to be wrong on the biggest winners, because they are the biggest winners for a reason. They won not just because I underestimated the cash flows, it’s because they were in the right place, the right time. Luck played a role. They kind of shot through the roof and I shouldn’t expect to get the biggest winners right.

So I never walk into this process saying I’m going to get the biggest winner for the next decade, I’d settle for the 20th best winner and kind of getting out too early because greed has killed more good investing strategies than any other quality.

I see people getting greedy with big winners, and let’s face it as human beings we can rationalize just about anything. So once I start abandoning a core investment philosophy, and my core philosophy has to be built upon the presumption that I value companies.

I make the best attempt I can to value the companies based on what I know. I buy the companies and by the same token I have to leave when the price gets too high, and if the minute I abandoned that, even on a single company, I run the risk of not having a core philosophy, which means I’m no longer… I’m chasing price.

I mean there are people that are good at doing it, I’m not good at doing it.

You can listen to the entire discussion here: