Core Philosophy
Basically: Value will eventually show, current valuation is a reflection of perception, not necessarily the actual value of a company.
Formula: Actual Value = (Future Earnings + Current Value) / Value of Money
Buy Great Businesses
- A stock is a piece of a real business.
- Own businesses that make money, grow over time, and have something special (a “moat”) that protects them from competition (which is bad!)
- Think like an owner, not trader. What’s the interests of managers and people who control your asset, is it aligned with yours?
Hold Long Term
- Time is your best friend. Time in beats timing.
- Selling too soon is like pulling up a tree to check if the roots are growing.
- Short term downturns are no cause for concern unless an underlying property of the asset is challenged or changed.
“100-Baggers“
- The best investments multiply over time, not overnight (easy come easy go)
- These companies usually have high growth, strong leadership, and a growth potential
- Amazon, Apple, and Google were once small, size doesn’t matter
Index Funds
- (John Bogle)
- Most people don’t have time to pick great stocks.
- Index funds let you own a little piece of every big company with low fees.
- Over time, the market usually goes up. Index funds help you ride that.
Greed During Fear
- (Warren Buffett)
- When the stock market crashes, most people panic. This is when great investors buy.
- When things are expensive and everyone is excited, be careful.
- Think long-term conditions, not short-term emotions.
Patience + Compound Growth
- Compounding is when money makes more money, and that money makes even more money.
- The longer you wait, the faster it grows (like a snowball rolling downhill).
- The best investors do nothing most of the time.
Avoid Dumb Mistakes
- (Charlie Munger)
- Don’t follow the crowd. Most people buy high and sell low, do the opposite.
- Don’t gamble. Fast money → no money.
- Focus on a few great bets, not too many random stocks (Also said by Ray Dalio at Bridgewater “without our 10 best trades we are mediocre”)
Build a Castle
- Start with a strong foundation (safe investments).
- Add layers of high-growth investments over time.
- Stay balanced, don’t bet everything on one stock.