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1/

Get a cup of coffee.

In this thread, I'll show you a simple way to work out a fair price to pay for a wonderful business.

Get a cup of coffee.

In this thread, I'll show you a simple way to work out a fair price to pay for a wonderful business.

3/

So, whenever we buy a stock, it's a good idea to ask ourselves 2 questions:

a) Is this a wonderful business? And,

b) Is it available at a fair price?

So, whenever we buy a stock, it's a good idea to ask ourselves 2 questions:

a) Is this a wonderful business? And,

b) Is it available at a fair price?

1/

Get a cup of coffee.

In this thread, I'd like to share with you a simple way to measure and track your progress towards financial independence.

Get a cup of coffee.

In this thread, I'd like to share with you a simple way to measure and track your progress towards financial independence.

2/

Financial independence is an end goal.

To define this goal properly, you need to answer 2 key questions.

(i) When would you consider yourself financially independent? And,

(ii) In how much time do you want to get there?

Financial independence is an end goal.

To define this goal properly, you need to answer 2 key questions.

(i) When would you consider yourself financially independent? And,

(ii) In how much time do you want to get there?

3/

Typically, financial independence means:

a) You won't have to work another day in your life for money, and

b) You and your family will still be able to live comfortably to the end of your days.

Typically, financial independence means:

a) You won't have to work another day in your life for money, and

b) You and your family will still be able to live comfortably to the end of your days.

1/

Get a cup of coffee.

In this thread, I'll walk you through the importance of understanding *correlations* between bets.

For example, a portfolio of *correlated* stocks can have very different performance characteristics compared to a portfolio of *uncorrelated* stocks.

Get a cup of coffee.

In this thread, I'll walk you through the importance of understanding *correlations* between bets.

For example, a portfolio of *correlated* stocks can have very different performance characteristics compared to a portfolio of *uncorrelated* stocks.

2/

Imagine we put $100K into a stock.

In the next 1 year, the stock could go down 30% (our worst case scenario).

Or it could go up 50% (our best case scenario).

Or it could give us a return somewhere between these extremes.

Say all such returns are equally likely.

Imagine we put $100K into a stock.

In the next 1 year, the stock could go down 30% (our worst case scenario).

Or it could go up 50% (our best case scenario).

Or it could give us a return somewhere between these extremes.

Say all such returns are equally likely.

1/

Get a cup of coffee.

In this thread, I'll help you understand the concept of Half Life, and how it's relevant to investing.

Get a cup of coffee.

In this thread, I'll help you understand the concept of Half Life, and how it's relevant to investing.

2/

Imagine we have an investment opportunity.

If the investment goes well, we get to double our money.

But if it goes badly, we'll end up losing three fourths of it.

There's a 50/50 chance of either outcome.

The question: is this a good bet or not?

Imagine we have an investment opportunity.

If the investment goes well, we get to double our money.

But if it goes badly, we'll end up losing three fourths of it.

There's a 50/50 chance of either outcome.

The question: is this a good bet or not?

3/

A simple way to approach this question is to calculate the bet's "expectation".

For every $1 we bet, there are 2 possibilities:

1. The lucky case, where we double our money and end up with $2, and

2. The unlucky case, where we lose (3/4)'th to end up with just $0.25.

A simple way to approach this question is to calculate the bet's "expectation".

For every $1 we bet, there are 2 possibilities:

1. The lucky case, where we double our money and end up with $2, and

2. The unlucky case, where we lose (3/4)'th to end up with just $0.25.

1/

Get a cup of coffee.

In this thread, I'll walk you through the concept of "path dependence".

This plays such a key role in deciding so many financial outcomes.

And yet, most financial projections completely ignore it.

Get a cup of coffee.

In this thread, I'll walk you through the concept of "path dependence".

This plays such a key role in deciding so many financial outcomes.

And yet, most financial projections completely ignore it.

2/

Suppose we have $1M invested in an S&P 500 index fund.

Say, we leave this money untouched for the next 30 years.

If we get a steady 10% per year return over this period, we'll be left with ~$17M.

Not a bad result.

Suppose we have $1M invested in an S&P 500 index fund.

Say, we leave this money untouched for the next 30 years.

If we get a steady 10% per year return over this period, we'll be left with ~$17M.

Not a bad result.

3/

Of course, we probably won't get a *steady* 10% return every year.

Some years, we'll likely make more than 10%. Other years, we may even get a negative return and lose money.

It's all part of the game.

Of course, we probably won't get a *steady* 10% return every year.

Some years, we'll likely make more than 10%. Other years, we may even get a negative return and lose money.

It's all part of the game.