After over a decade of experience of dealing with Retail Investors, it feels like the learnings from this book is something EVERY RETAIL INVESTOR MUST KNOW
Here are 10 learnings from the book for every retail investor:
- Don’t try to time the market
Time in the market beats timing the market.
“Unless you buy a stock at the exact bottom, you will be down at some point after you make every investment. Your success entirely depends on how dispassionate you are towards ST market fluctuations.”
- Buy good businesses
Buying a share of a good business is better than buying a share of a bad business.
“The Magic Formula focuses on buying good businesses (high ROIC) which are cheap (high earnings yield).”
- Know what you own
Always invest within your circle of competence.
“Choosing individual stocks without any idea of what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.”
- You will underperform
By definition, you will underperform the market from time to time.
“Stock prices move around wildly over very short periods of time. This does not mean that the values of the underlying companies have changed very much during that same period.”
- Every investor is unique
You can borrow someone’s idea, but you can’t borrow their conviction.
“The odds of anyone calling you on the phone with good investment advice are about the same as winning the Lotto without buying a ticket.”
- Determine your risk appetite
Never make investments which will cause you to stay awake at night.
“Almost everyone should have a significant portion of their assets in stocks. But here it comes – few people should put all their money in stocks.”
- The market will eventually be right
While in the short term the market is inefficient, in the long-term, the market always gets it right.
“Maintaining a three- to five-year horizon for your stock market investments should give you a large advantage over others.”
- Know what you own
As an investor, you should always make your homework.
“Choosing individual stocks without any idea of what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.”
- Buy companies with a high ROCE
A high and consistent ROCE is a great sign that the company has a sustainable competitive advantage.
“In short, companies that achieve a high return on capital are likely to have a special advantage of some kind.”
- Use a margin of safety
The cheaper you can buy a stock, the higher your margin of safety.
“The secret to investing is to figure out the value of something and then pay a lot less.”
HAPPY INVESTING
Thanks and Regards,
www.intellexconsulting.com, www.buzpals.com, www.buysellmergers.com
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