I am frequently asked: what are the best books on investing? How do I develop my investment philosophy and process? How do I become a good investor? I have mentored many aspiring investors, and I also teach the Value Investing Seminar at the F.W. Olin Graduate School of Business. The investing books that I describe below have helped many aspiring investors make their journey from a beginner to an investing expert.Read More
Earlier this year I gave a talk to students at Babson College on how to learn value investing and become an investor. You can watch the talk and the Q&A discussion that followed in this video.Read More
Charlie Munger presided over Daily Journal’s annual meeting on February 14th, Valentine’s Day, perhaps to ensure that only the most dedicated adherents choose to attend. Charlie is known for his blunt wit and investing insight, and his intellect has not gotten any duller with age. We can all learn from his insights both in investing and in life.Read More
Long-term investing doesn’t happen by accident. You need to be prepared. There are three things that can allow you to use market volatility to your advantage: the right structure, a long-term investment process and a behavioral checklist to allow you to remain rational when everyone else is being anything but.Read More
Many of you don’t need an investment manager. Others are paying hefty fees for a service different than the one you think you are getting. Before giving up a good chunk of your future wealth, consider what your actual needs are before deciding how to proceed.Read More
When I was at a group dinner with Warren Buffett 16 years ago, I asked him: what do you look for when you evaluate a stock? He answered: First he decides whether he can roughly estimate the business’s key economic characteristics 5–10 years out. If he can’t then he eliminates it from consideration right then and there.Read More
Before becoming Chairman and CEO of Berkshire Hathaway, Warren Buffett built an amazing track record compounding capital in a small partnership in the 1950s and 1960s. Chances are you would not have invested with him: his partnership did not appear conventional and he did not invest conventionally.Read More
If GE investors had been told about the recent challenges at the company 15 years ago, would any of them have believed them to be possible? Investors who invested in GE stock 15 years ago have lost more than 40% of their capital through the end of October 2018. This compares with a gain of over 250% over the same time period in the S&P 500 index, which tracks the performance of large U.S. stocks. What can we learn from the challenges at GE to become better investors?Read More
“It’s different this time.” This phrase has likely cost many investors far more than they realize. Each period of time is indeed different. However, there are many insights that we can learn from history that should inform how we invest today. Failing to learn from the past mistakes of others can be hazardous to your wealth.Read More
Warren Buffett wrote in his 1996 letter to Berkshire Hathaway shareholders: “You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”Read More
Before you succumb to the charms of a charismatic management team or fall for someone pitching you on another “story stock,” read the skeptic’s checklist. It won’t give you all the answers, but it will give you a fighting chance against the biases that you are likely frequently exposed to.Read More
What makes a great annual letter from the CEO to the shareholders? The typical, generic annual letter that I read adds little to the numbers and sometimes obfuscates more than it illuminates. The best letters go beyond the numbers and help shareholders get a deeper understanding of the company, how it is performing and the decision-making process the management team employs. In this article I examine the aspects of a great annual letter and provide five examples.Read More
Listening to Warren Buffett, Charlie Munger and other smart investors over the course of the weekend surrounding the Berkshire Hathaway meeting in Omaha is always informative. This year was marked by the usually laconic Charlie Munger, known for his typical “I have nothing to add” answer, answering many questions in depth. Below I examine my 10 insights from this year’s trip, which are a combination of new ideas and helpful reminders about those from the past that are still important today.Read More
Diversification is sometimes described as “the only free lunch” in investing. But is it? Not in the kind of fundamental value investing that I do.
Increased diversification comes with two potential costs:
At a certain point, new investments are likely to yield increasingly lower returns.
The time required to underwrite new investments reduces the quality of the underwriting of existing investments.
At the 2017 Berkshire Hathaway Annual Meeting, Charlie Munger, Warren Buffett’s partner, said: “A lot of other people are trying to be brilliant and we are just trying to stay rational. And it’s a big advantage.” It’s a simple, but crucial insight – a lot of the edge in investing can be traced to the ability to stay rational and execute your approach at moments of highest pressure and uncertainty. So what is the “mental game” in investing, and how do you make sure that yours helps your investing results?Read More
Conviction is a necessary quality for any investor – lack thereof can lead to an inability to stay the course on a successful contrarian investment. Yet without flexibility investors can easily fall prey to various behavioral biases such as anchoring and overconfidence and fail to correctly change their minds when the evidence merits doing so.Read More
- Don’t invest in anything that you don’t understand. Yourself. Not because someone sold it to you or because others are doing it.
- Don’t pay high fees for investment products unless you know why the product is worth it. Many are not.
Conventional financial wisdom considers volatility to be one of the greatest risks in investing. A small minority of investors, mostly among value investors – a group to which I belong, take a completely opposite view and believe that it is the probability of permanent capital loss, not volatility that constitutes risk.Read More