Buffett is the most successful stock investor of our time
Here are 7 lessons that will make you a better investor:
Buffett has 3 main inspirations for his style:
1. Benjamin Graham
Graham taught Buffett to buy stocks at attractive prices
He promoted a rigid process for investing with strict criteria for valuation and quality
He used the metaphor of "Mr Market" to drive his points.
2. Phil Fisher
Fisher taught Buffett to focus his portfolio and think long-term
Fisher understood the value of doing deep research and so-called "scuttlebutt investing" where the investors talk to all kinds of people related to the business that is under analysis.
Nick Sleep is known for having a 3-stock portfolio ππ§΅
He achieved a cumulative return of 921% vs. the MSCI world index of 116,9% over 13 years.
This is how he did it π§΅
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β’Long-term mindset
Preventing the interruption of compounding remains one of the best methods for long-term returns.
Sleep focused on the business' destination, and ignored short-term noise
His mere focus was to pick great long-term winners
β’Focus on the destination
Sleep focused on the company's destination.
To help him do this, he used 3 questions:
- Where will X be in 10-20 years?
- What must management do now to reach that destination?
- What circumstance could prevent X from reaching its destination?
Munger is said to have the best 30-second mind in the world
His deep knowledge on psychological biases and mental models gave him a competitive advantage.
Here are 6 lessons that will make you a more effective thinker:
What is a psychological bias?
Also known as a βcognitive biasβ it can be defined as a pattern of deviation from rational judgment.
In other words, why do we (human beings) sometimes act and think like morons.
Most investors have been caught in one of these scenarios:
I) A stock keeps increasing, all your friends are making money, and you want to get in too! (FOMO)
II) A stock keeps falling in price, the pain gets worse every day, and you sell at the point of maximum pain (only to realize it was the bottom). (Appeal to fear)
III) You think you know more about a certain stock or industry than you do, you agree with all articles and reports that confirm your thesis, and neglect those that oppose your thesis (Confirmation bias).