Good advice on Investing: (still work-in-progress)
Don’t lose money (focus relentlessly on downside)
Munger sought "wonderful companies at fair prices" with durable moats and excellent management ("wonderful companies at a fair price rather than fair companies at a rock-bottom price)
The way to wealth is as plain as the way to market. It depends chiefly on two words, industry and frugality; that is, waste neither time nor money, but make the best use of both. Without industry and frugality nothing will do; with them, everything. (B. FRANKLY)
If you don’t get elementary probability into your repertoire, you go through life like a one-legged man in an ass-kicking contest (C Munger)
You need to have the investment discipline to wait for a fat real opportunity. If you are forced to be measured against benchmarks, be fully invested, constantly look over your shoulder - you would probably hate it. Like being in shackles but unfortunately that’s exactly what most asset management is like…
Asset allocation is the holy grail to investing
Look for asymmetrical risk reward
Have 7-12 ideally uncorrelated revenue streams via diversification.
Don’t work for a company you would not invest money in, because when you are working you are investing the most valuable thing you have: your time.
You have got to marry the best person who is convenient to find and who will have you. Investing is a lot like that.
the world is split between the ones that doesn't know how to start to make money and the ones that doesn't know when to stop
Two things really drive an economy. Inflation & growth GDP
Barometer (pulse of economy): Use commodities index for proxy for inflation and unemployment benefits as proxy for economic strength.
In a two by two with “right and wrong” & “contrarian and consensus” almost all the gains are made being right and contrarian. But it can be a tough place to live.
Never automatically think that the investments that did well in the past are good investment for the future
Returns are = cash (risk free), beta (market risk), Alfa (stock picking etc.)
There are lies, there are damn lies and there are statistics…
“Up the eskalator, Down the elevator” is what happens if you don’t have a portfolio but just take risk…
Buy panic and sell hysteria.
Slow progress is still a million times better than no progress as it kickstarts the 8th wonder of the world - compounding. Small steps matter more when you play a long game because a long horizon allows you to compound small advances into quite large achievements.
Pay yourself first - always save 10% of your salary
Intensity is the price of excellence
In VC the power law is all that matters (a few investments in a large portfolio will make all the difference) - focus on them
Create a well diversified portfolio and stick to it with minimal tactical bets.
The world is not driven by greed. It is driven by envy. Wealth is relative…
Focus on probabilities not possibilities
Use probability weighting for decision making
Pay less attention to the conclusion and more attention to how you got there
The empire long divided must unite. The empire long untied must divide. So it has always been.
The stock market is the only place where people run out of the store during a sale.
Most people think improbably ideas are unimportant. But the only thing that is important is the improbably
Interest rate is like gravity to the stock market. When it goes up the market goes down and vice versa.
To do well in inflation you have to buy a business that can rather easily raise prices without a significant loss of #units sold or market share.
You can observe thousands of white swans without being able to dismiss the existence of a black swan - but a single observation of a black swan is enough to prove the statement wrong that all swans are white.
If people are rational (as the efficient market hypothesis states) then all historical information would be calculated in and thus useless. This is not the case as we are dealing with human beings.
Success has more to do with how you handle what you don’t know that what you do know. (Heuristics, biases and decision-making under uncertainty).
The tide continues to be way more important than the swimmers
Look for strong moats and fokus on the long term (defer gratification)
Take small step after small step guided by rationality
After burning your mouth on hot milk you blow on your yoghurt
The average investor believes comments stick to be more risky during or after a crash - even tough the opposite must be true.
Hindsight is forever 20/20 but foresight is legally blind…
It ain’t what you dont know that gets you in trouble. It is what you know for sure…
The success in investing come not from buying good things but from buying things well. If you don’t know the difference you’re in the wrong business (price matters especially for great companies)
Your Favorite Holding Period should be Forever.
Money is like manur. If you pile it up like crazy it stinks. If you spread it out it fertilises. (Leave a little bit on the table for the other guy - look for a triple win).
All models are wrong, goes the statisticians’ adage, but some are useful
Luck is the residue of preparedness!
“Wrong decisions are part of life. Being able to make them work anyway is one of the abilities of those who are successful.” — Warren Buffett
Never use a credit card for credit. The only credit worth taking is for something "almost" certain to rise in value, like a well located home. Most things lose value the moment you buy them. Never take credit to buy losers.
Humility is mostly about being very honest about how much you owe to luck. Work on your tone. Often ideas are rejected because of the tone of voice they are wrapped in. Humility covers many blemishes.
Weird but true: If you continually give, you will continually have. So, the secret to living is giving.
Do not cling to a mistake just because you spent a lot of time making it. Learn and integrate into your very being what sunk cost is.
Strong opinions, clearly stated, but loosely held is the recipe for a life of greatness in money management. Always ask yourself: what would it take to change my mind?
When investing watch out for the three Ls: Liquor, Ladies & Leverage (C. Munger)
Read a lot of history so you can understand how weird the past was; that way you will be comfortable with how weird the future will be. History may not repeat itself but it rhymes - and as an investor there is lots to be learned about similar things happening before your lifetime. Money is not a new concept...
Never hesitate to invest in yourself - to pay for a class, a course, a new skill. These modest expenditures pay outsized dividends - and skill is a great hedge against inflation. Most people are anxious to improve their circumstances, but are unwilling to improve themselves and remain bound. To put it differently, if you find yourself wretchedly poor and become anxious to improve your circumstances and yet shirks your work and consider yourself justified in trying to deceive your employer on the grounds of the insufficiency of the wage. Then you do not understand the basis of true prosperity and you are totally unfit to rise out of your wretchedness.
Stop feeling sorry for yourself and search instead for the hidden justice that regulates life. Concentrate your mind and cease to accuse others as the cause of your troubles and build yourself up with strong and useful thoughts. Accept the circumstances and begin to use them to aid your rapid progress - and you will discover hidden powers and possibilities within yourself. (inspired by J. Allen).
These questions are fundamental in both business finance and private finance. What's your net worth? How much money do you earn? What's your monthly expenses? Your portfolio breakdown? The acceleration plan for each income stream? You will never attract more money if you don't understand it. Your finances are your foundation. If you don't know them you're building a house on sand.
Happiness is positive cash flow. Money is a cruel mistress - if you ignore her she will leave you for someone else. The number one reason for small businesses to go out of business is to run out of money.
“Don’t mistake my silence for ignorance, my calmness for acceptance or my kindness for weakness”
— Dalai Lama