Buy low and sell high - It's pretty simple

Buy low and sell high should be the universal approach to investment management. How could anything else make sense? The philosophic component of an 'investment process' is developing a theoretical understanding of the concepts of 'buy low' and 'sell high'.

My journey to understand price and value has been one undertaken with an open and inquiring mind. With my actuarial training, my natural early tendency was towards a discount cashflow and Graham "in the short run the market is a voting machine, but in the long run it is a weighing machine" based approach to the share market.

I then better developed an understanding of the importance of the reinvestment rate on retained earnings, partly through an analysis of Berkshire Hathaway's NAV performance track record and also through books on 'value investing'. Up to this stage in my journey I thought the aim of stock analysis was to identify the 'intrinsic value' of a company.

I did, however, want to better understand the formation of prices. I decided to undertake a thorough investigation of the Austrian school. This largely involved reading Mises, Rothbard and articles posted on the mises.org website. I thought there was much truth to their work, but that too much of it was driven by libertarian ideology, leading to some errors.

I then came across the New Austrian School of Economics (NASOE), founded by Professor Antal Fekete, which is based on the work of Carl Menger. From my learning with this school I've developed my understanding of marginal utility, price formation and the importance of marketability - to whom, quantity, over space, and over time. I've also developed my understanding of value as being a subjective concept. 

Through the work of the NASOE I came to appreciate Menger's 'quality theory' of money, with the concept of money as the most marketable good used for indirect exchange in a free market.

With a sound foundational understanding of price formation in the context of marketability and subjective value, you too will be well positioned to 'buy low' and 'sell high'.