9. Practice Inactivity,
Not Hyperactivity
There are times when doing nothing is a sign of investing brilliance.
Be a decade’s trader, not a day trader.
10. Don’t Look
at the Ticker
Tickers are all about prices. Investing is about a lot more than prices.
It is about value. It is about wealth.
Abstain from looking at share prices every day. Study the playing field
and not the scoreboard. Know the value of something rather than the
price of everything.
11. View Market
Downturns as Buying Opportunities
Market downturns aren’t body blows; they are buying opportunities.
Change your investing mind-set. Reprogram your thinking. Learn to like
a sinking market because it presents
great buying opportunity. Pounce when the three variables come together.
When a strong business with an
enduring competitive advantage, strong management, and a low stock price
come onto your investment screen.
12. Don’t Swing
at Every Pitch
What if you had to predict how every stock in the Standard & Poor’s
(S&P) 500 would do over the next few years?
In this scenario you have very poor chance of being correct. But if
your job was to find only one stock among those 500 that would do well?
In this revised scenario you have a good chance. A few good investments
are all that is needed.
13. Ignore the
Macro; Focus on the Micro
The big things – the large trends that are external to the business
– don’t matter.
It’s the little things, the things that are business-specific, that
count.
It’s possible to imagine a cataclysm so terrible that the markets would
collapse and not bounce back.
Externalities don’t matter – and you can’t predict them, anyway. And
what can you do about them?
Focus on what you can know: the workings of a good business.
14. Take a Close
Look at Management
The analysis begins – and sometimes ends – with one key question: Who’s
in charge here?
Assess the management team before you invest. A investing in any company
that has a record of financial or accounting shenanigans, (creative
accounting, accounting jugglery). Weak accounting usually means weak
business performance.
Strong companies do not have to resort to tricks.
15. Remember,
The Emperor Wears No Clothes on Wall Street
Wall Street is the only place where people go to in Rolls Royce to get
advice from people who take the subway.
Ignore the charts.
A value investor is not concerned with charts. Invest like Benjamin
Graham.
Graham told investors to “search for discrepancies between the value
of a business and the price of small pieces of that business in the
market.”
This is the key to value investing, and it’s far more productive than
getting dizzy studying hundreds of stock charts.
Offer documents of most mutual funds say – in small print – that past
performance is no guarantee of future success.
Buffet says the same thing about the market: If history revealed the
path to riches, librarians would be rich.
16. Practice
Independent Thinking
When investing, you need to think independently.
Make independent thinking one of your portfolio’s greatest assets. Being
smart isn’t good enough, says Buffet.
Lots of high-IQ people fall victim to the herd mentality. Independent
thinking is one of Buffet’s greatest strengths.
Make it one of your own.
