Since Gautam and I had dinner in Omaha, we've been friends.
I had the opportunity to proofread his book, which launches today.
Here are 12 things I learned from The Making of a Value Investor:
I had the opportunity to proofread his book, which launches today.
Here are 12 things I learned from The Making of a Value Investor:
1. The key to success in investing is long-term survival
To win a marathon, you must first finish.
Successful investing is about doing slightly above average for a very long time without making big mistakes.
To win a marathon, you must first finish.
Successful investing is about doing slightly above average for a very long time without making big mistakes.
2. The best protection against a bear market
During a crisis:
- Bad companies are destroyed
- Good companies survive them
- Great companies are improved by them
Invest in high quality-businesses led by high-quality managers to reduce your risk.
During a crisis:
- Bad companies are destroyed
- Good companies survive them
- Great companies are improved by them
Invest in high quality-businesses led by high-quality managers to reduce your risk.
3. Stay rational
The key to making money in stocks is to not get scared out of them
“Nothing seems to be working. Maybe I am really just an average investor at best. Maybe I just got lucky in the past. Maybe this is the bear market talking inside me. I am not sure."
The key to making money in stocks is to not get scared out of them
“Nothing seems to be working. Maybe I am really just an average investor at best. Maybe I just got lucky in the past. Maybe this is the bear market talking inside me. I am not sure."
4. Diversify your Portfolio
The only protection against unknown unknowns is diversification.
Diversify your Portfolio across different geographies and sectors.
The only protection against unknown unknowns is diversification.
Diversify your Portfolio across different geographies and sectors.
5. Sometimes you win, sometimes you learn
The greatest learnings always come from a bear market, and these lessons bear fruits for an entire lifetime.
Mentally prepare yourself for bear markets and be aware that you’ll make plenty of mistakes during your investment career.
The greatest learnings always come from a bear market, and these lessons bear fruits for an entire lifetime.
Mentally prepare yourself for bear markets and be aware that you’ll make plenty of mistakes during your investment career.
6. Buy when there's blood in the streets
The cheaper you can buy a stock, the better.
Never let a good bear market go to waste.
The cheaper you can buy a stock, the better.
Never let a good bear market go to waste.
7. Deadly Sins of Investing
Always avoid leverage, shorting and derivatives.
Leverage is very dangerous. If you're smart you don't need it and if you aren't smart you shouldn't use it.
Always avoid leverage, shorting and derivatives.
Leverage is very dangerous. If you're smart you don't need it and if you aren't smart you shouldn't use it.
8. Study history
A study of past manias and crashes should be part of every investor’s body of historical knowledge.
It will help you to do the average when everyone else is going crazy.
A study of past manias and crashes should be part of every investor’s body of historical knowledge.
It will help you to do the average when everyone else is going crazy.
9. Manic-Depressive Mr. Market
In a bear market, good news is sold into, and bad news is hammered.
Don't focus on the fluctuation of stock prices. Instead, focus on the evolution of the intrinsic value.
In a bear market, good news is sold into, and bad news is hammered.
Don't focus on the fluctuation of stock prices. Instead, focus on the evolution of the intrinsic value.
10. After rain comes sunshine
It is always darkest before dawn. You can buy stocks for cheap during a crisis
Take advantage of this.
It is always darkest before dawn. You can buy stocks for cheap during a crisis
Take advantage of this.
11. Don't buy cyclicals or commodity stocks
Focus on great companies led by outstanding managers.
“The bitterness of poor quality remains long after the sweetness of low price is forgotten.” – Benjamin Franklin
Focus on great companies led by outstanding managers.
“The bitterness of poor quality remains long after the sweetness of low price is forgotten.” – Benjamin Franklin
12. Focus on what matters
In a bull market, most investors focus on the income statement and reported net profit growth.
Very few care about the balance sheet, cash flow, or management quality.
The hard lessons are learned in the subsequent bear market.
In a bull market, most investors focus on the income statement and reported net profit growth.
Very few care about the balance sheet, cash flow, or management quality.
The hard lessons are learned in the subsequent bear market.
You can order Gautam's book here:
amazon.com
amazon.com
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