{"id":31482,"date":"2024-12-26T23:56:00","date_gmt":"2024-12-26T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=31482"},"modified":"2024-12-31T11:14:12","modified_gmt":"2024-12-31T03:14:12","slug":"complicated-math-stock","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/","title":{"rendered":"Complicated math is not a prerequisite in stock investing"},"content":{"rendered":"\n<p>Most people has a myth, complicated math play a key role to invest successful.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/#Buffetts_plain_words\" >Buffett&#8217;s plain words<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/#Peter_Lynchs_preach\" >Peter Lynch&#8217;s preach<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/#Need_safety_margin\" >Need safety margin<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/#Fingers_and_toes_investing\" >Fingers and toes investing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/#Quantitative_is_not_priority_one\" >Quantitative is not priority one<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/#Closing_words\" >Closing words<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Buffetts_plain_words\"><\/span>Buffett&#8217;s plain words<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Buffett said: \u201cIf calculus\u00a0or\u00a0algebra\u00a0were\u00a0required\u00a0to be a\u00a0great investor,\u00a0I&#8217;d have\u00a0to\u00a0go back\u00a0to delivering\u00a0newspapers.\u201d<\/p>\n\n\n\n<p>Below was from <a href=\"https:\/\/www.wsj.com\/articles\/BL-MB-6658\" target=\"_blank\" rel=\"noopener\">WSJ<\/a>, May 2, 2009 reported.<\/p>\n\n\n\n<p>Mr. Buffett on complex calculations used to value purchases: \u201cIf you need to use a computer or a calculator to make the calculation, you shouldn\u2019t buy it.\u201d<\/p>\n\n\n\n<p>Buffett on the use of higher-order math in finance: \u201cThe more symbols they could work into their writing the more they were revered.\u201d<\/p>\n\n\n\n<p>Mr. Buffett adds: \u201cIf you stand up in front of a business class and say a bird in the hand is worth two in the bush, you won\u2019t get tenure\u2026. Higher mathematics my be dangerous and lead you down pathways that are better left untrod.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Peter_Lynchs_preach\"><\/span>Peter Lynch&#8217;s preach<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Peter Lynch wrote &#8220;Investing in stocks is an art, not a science, and people who\u2019ve been trained to rigidly quantify everything have a big disadvantage.&#8221; Peter Lynch stated &#8220;If stockpicking could be quantified, you could rent time on the nearest Cray computer and make a fortune. But it doesn\u2019t work that way. All the math you need in the stock market you get in the fourth grade. Logic&nbsp;is the subject that\u2019s helped me the&nbsp;most&nbsp;in&nbsp;picking stocks.&#8221;<\/p>\n\n\n\n<p>In his book &#8220;<a href=\"https:\/\/www.amazon.com\/One-Up-Wall-Street-Already\/dp\/0743200403\" target=\"_blank\" rel=\"noopener\">One Up On Wall Street<\/a>&#8220;, Peter Lynch said: &#8220;Investing in stocks is an art, not a science, and people who\u2019ve been trained to rigidly quantify everything have a big disadvantage.&#8221; <\/p>\n\n\n\n<p>Peter Lynch said in an interview: &#8220;In this business if you\u2019re good, you\u2019re right six times out of ten. You\u2019re never going to be right nine times out of ten. This is not like pure science where you go, Aha and you\u2019ve got the answer. By the time you\u2019ve got Aha, Chrysler\u2019s already quadrupled or Boeing\u2019s quadrupled. You have to take a little bit of risk.&#8221; Peter Lynch said &#8220;All the&nbsp;math&nbsp;you need in the&nbsp;stock&nbsp;market you get in the fourth grade.\u201d Peter Lynch stated&nbsp;&#8220;Philosophy and logic are more important than&nbsp;math&nbsp;or finance in picking&nbsp;stocks.&#8221;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Need_safety_margin\"><\/span>Need safety margin<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The intrinsic value of a stock cannot be determined through precise calculations. This is exactly what Buffett observed: &#8220;The potential and fundamental value of a stock is a value that cannot be determined, but must be estimated.&#8221;<\/p>\n\n\n\n<p>Buffett said: &#8220;Calculations of intrinsic value, though all-important, are necessarily imprecise and often seriously wrong.&nbsp;The more uncertain the future of a business, the more possibility there is that the calculation will be wildly off-base.&#8221; <\/p>\n\n\n\n<p>Benjamin Graham:&#8221;Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw therefrom.&#8221;<\/p>\n\n\n\n<p>Benjamin Graham wrote: &#8220;The combination of precise formulas with highly imprecise assumptions can be used to establish, or rather to justify, practically any value one wishes.&#8221;<\/p>\n\n\n\n<h2 class=\"has-medium-font-size wp-block-heading\"><span class=\"ez-toc-section\" id=\"Fingers_and_toes_investing\"><\/span><strong>Fingers and toes investing<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In 1996 Berkshire Hathaway annual meeting:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Charlie Munger: &#8220;We have such a &#8220;fingers and toes&#8221; style around here. Warren often talks about these discounted cash flows, but I \u2019 ve never seen him do one . . .&#8221;<\/li>\n\n\n\n<li>Warren Buffett responsed immediately:That&#8217;s true. It&#8217;s sort of automatic. If you have to actually do it with pencil and paper, it \u2019 s too close to think about. It ought to just kind of scream at you that you \u2019 ve got this huge margin of safety.<\/li>\n<\/ul>\n\n\n\n<p>This is why Buffett quoted the famous saying of the economist<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/05\/01\/investment-master-john-maynard-keynes\/\" target=\"_blank\" rel=\"noreferrer noopener\"> John&nbsp;Maynard Keynes \u201cIt is better to be roughly correct than to be precise.\u201d <\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Quantitative_is_not_priority_one\"><\/span>Quantitative is not priority one<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Friedrich Hayek has the same view. He believes that almost everyone pays too much attention to quantitative factors, because these values can make use of statistical techniques taught in schools; and factors that are difficult to measure may be more important.<\/p>\n\n\n\n<p>Albert Einstein once hung a striking slogan in his laboratory &#8220;Not everything that matters can be measured.&#8221;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Closing_words\"><\/span>Closing words<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Keep what Peter Lynch said in your mind &#8220;All the&nbsp;math&nbsp;you need in the&nbsp;stock&nbsp;market you get in the fourth grade.&#8221;<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"145\" height=\"120\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/11\/complicated-math-Custom.jpg\" alt=\"Complicated math\" class=\"wp-image-31540\"\/><figcaption class=\"wp-element-caption\">credit: leonardo.ai<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/12\/26\/complicated-math-stock\/\">Complicated math is not required in stock investing<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/19\/investing-has-no-formula\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investing has no formulas, but there are ways to invest successfully<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/16\/vaguely-right-than-wrong\/\">I would rather be vaguely right than precisely wrong<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/02\/investment-uncertainty\/\" target=\"_blank\" rel=\"noreferrer noopener\">The uncertainty in investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/29\/price-and-value\/\" target=\"_blank\" rel=\"noreferrer noopener\">Misunderstanding of price and value<\/a><\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n\n\n\n<p><br><\/p>\n\n\n\n<p> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most people has a myth, complicated math play a key role to invest successful. Peter Lynch said &#8220;All the math you need in the stock market you get in the fourth grade.&#8221;<\/p>\n","protected":false},"author":1,"featured_media":31540,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[397,50,15,14,43,11],"tags":[],"class_list":["post-31482","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-margin-of-safety","category-benjamin-graham","category-charlie-munger","category-investing-concept","category-peter-lynch","category-buffett"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/31482","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=31482"}],"version-history":[{"count":23,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/31482\/revisions"}],"predecessor-version":[{"id":32772,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/31482\/revisions\/32772"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/31540"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=31482"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=31482"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=31482"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}