Richer, Wiser, Happier

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🎯 The Book in 3 Sentences

Be patient and selective as a value investor.
Say no to almost everything and stay within things you understand.
Clone successful people and hang out with those who are better than you.
Be in alignment with who you are and don’t worry about what others think of you.
To be a great investor, you need to resist the temptation to follow the crowd and instead buy assets when they’re undervalued and diversify your holdings.
Have a simple and consistent investment strategy that works well over time.
Focus on small incremental advances sustained over long periods of time.

If you want to participate in the market all the time, then it’s a mug’s game and you’re going to lose.

The difference between successful people and really successful people is that really successful people say no to almost everything.

Take a simple idea and take it seriously.

It is impossible to produce superior performance unless you do something different from the majority.

Material assets bring comfort, but help little toward happiness or usefulness.

The story of Mohnish Pabrai.
The principles for a value investor:
- Be patient.
- Be selective.
- Say no to almost everything.
- Stay within things you understand.
- Buy stocks at a big discount to their underlying value.
- Avoid anything too hard.
- Make a small number of mispriced bets with minimal downside and significant upside.
Filters to invest in a company:
- Is it something that I truly understand?
- Is it trading at a discount?
- Does it have a competitive advantage and an honest and capable CEO?
- Are the company’s financial statements clear and simple?
Clone successful people.
Hang out with people who are better than you.
Don’t worry about what others think of you.
Be in alignment with who you are. Don’t do what you don’t want to do or what is not right for you.

The story of John Templeton.
It’s genetic for humans to follow the tribe. Don’t follow the herd to be a great investor.
Buy when everyone is selling.
People are careless and optimistic when they have big profits and excessively pessimistic and cautious when they have big losses.
Diversify broadly to protect yourself from your own fallibility.
The best way to find bargains is to study whichever assets have performed most dismally in the past 5 years, then assess whether the cause of those woes is temporary or permanent.

The story of Howard Marks.
The average annual return for stocks from 1926 to 1987 was 9.44 percent, but “if you had gone to cash and missed the best 50 of those 744 months, you would have missed all of the return.
The market will correct itself.
We can’t predict or control the future.

The story of Jean-Marie Eveillard.
Always keep enough cash in reserve so we’ll never be forced to sell stocks in a down run.
Never borrow to excess.
Avoid the temptation to speculate on hot stocks with supposedly glorious growth prospects but no margin of safety.
Five rules for resilience:
- Respect uncertainty. Expect disorder, chaos, volatility, and surprise, which are parts of the system and their timing can’t be predicted.
- Reduce or eliminate debt, avoid leverage, and beware of excessive expenses.
- Instead of fixating on short-term gains or beating benchmarks, we should place greater emphasis on becoming shock-resistant, avoiding ruin, and staying in the game.
- Beware of overconfidence and complacency.
- Be keenly aware of your exposure to risk and should always require a margin of safety.

The story of Joel Greenblatt.
We each need a simple and consistent investment strategy that works well over time—one that we understand and believe in strongly enough that we’ll adhere to it faithfully through good times and bad.
You don’t need the optimal strategy. You need a sensible strategy that’s good enough to achieve your financial goals.
It’s important to remember that you can be a rich and successful investor without attempting to beat the market.

The story of Nick Sleep, Zak Zakaria.
In a world that’s increasingly geared toward short-termism and instant gratification, a tremendous advantage can be gained by those who move consistently in the opposite direction.

The story of Tom Gayner.
Victories tend to be the result of small, incremental advances and improvements sustained over long stretches of time.
Focus on what you are best at and what matters most to you.
The art of subtraction is incalculably important, particularly in an age of information overload when our minds can so easily become scattered.

The story of Charlie Munger.
Know what you own.
Make your mistakes nonfatal.
Actively collecting examples of other people’s foolish behavior is an invaluable antidote to idiocy.
Meditation, exercise, sleep, and nutrition improve brain health.