"Compound Interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it." -- Albert Einstein
A simple story As the tale goes, the king was so impressed with the game of chess that he soon became an addicted player. He offered the inventor of the game any reward he desired. The inventor said, "All i want is for you to put one grain of rice on the first square and then double the grains on the next square and keep doubling till the last square."
The king thought the guy was crazy. He was prepared to give him so much more and all he wanted was some grains of rice.
Thats about 18,446,744,073,709,551,615 grains of rice. Equivalent to 461,168,602,000 metric tons that equivalent to US$300 trillion at current prices(Nov 25, 2016). Thats entire wealth of the planet.
Invest in business where people would pay money upfront.
Split your time into two buckets
Invest, If you have fortitude to buy something you never heard and their stock prices have never moved for a long time. You have to be a kind of person who would love to watch the paint dry for days months years.
Dont look at companies where there are already 20-30 analysts following. By looking at their reports you will know there is no 5x or 10x. That's the case with 1000 largest businesses in US, forget about them. So if company is fortune 500 or s&p 500, we are done. Go fishing where the fishes are.
Overtime almost all moats erode, all companies looses their competitive advantages.
Spend time on what energies you and decrease time on what doesn't energies you.
High risk & Uncertainty : Usually businesses with low uncertainty tend to be fully priced, they almost become like bonds. Low risk and high uncertainty is a wonderful combination. Risk is the potential for capital loss, while uncertainty is a wide range of possible outcomes. When the market gets confused between risk and uncertainty, it is time to profit handsomely from that confusion.
Protect your downside, upside will take care of itself.
Patience and decisiveness need to go together in investing.
Recurring Revenue Streams (RRS) is the most important thing in a business. This is the Holy Grail to business.
VLCC Industry scenario : VLCC(very large crude carriers) are big oil tankers. VLCC spot prices range from $10k to $250k. To break-even they need to make $25k a day. So when prices go to $10k, all companies start to scrape and get money from steel. One needs to remember that it will take 2-3 years to build a VLCC. So all the companies scrape at the same tome and build shop at the same time. They give orders when spot prices are at 80k.
During a meeting with Charlie Munger had said "If an investor just did three things, the end results would be vastly better than the rest."
Charlie munger said to Mohnish "Temples and churches make you repeat stuff because as you shout it out, you pound it in".
Charlie munger is successful because he is rational not because of he is intelligent.
Start saving very early in life. Early 20s.
Maximize use of tax-advantaged accounts. Employer match is icing on the cake.
ALWAYS rollover to an IRA when you change jobs.
NEVER borrow against the 401(k).
Stick to low cost index funds.
Do not dance in and out of funds.
Play the game for 4-5 decades.
If you are investing in ETF funds, look for funds with low expense ratio(around 0.04 - 0.09)
Take up one idea. Make that one idea your life - think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea, and just leave every other idea alone. This is the way to success. -- Swami Vivekananda(1863 - 1902)
Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will amount to something. This is such a no-brainer -- Charlie Munger
Examples of tax-deferred and tax-advantaged accounts are:
Its in the nature of stock market to go way down from time to time. Theres no system to avoid bad markets. You cant do it unless you try to time the market, which is a seriously dumb thing to do. Conservative investing with steady savings without expecting miracles is the way to go -- Charlie Munger
Monish's constant reminder. This is his car plate, it decrypts to compound @ 26% annually(COM-compound; LB-pound; 26-26%)
Thou shall not skim off the top
Thou shall not have an investment team
Thou shall accept I shall be wrong one-third of the time
Thou shall look for hidden 1x price-earnings(PE) stocks
Thou shall never use Excel
Thou shall always have a rope to climb out of the deepest well
Thou shall be singularly focused
Thou shall never short
Thou shall not be leveraged. Neither a long-term lender nor a short-term borrower be
Thou shall be a shameless cloner
Go and work for people who like, admire and trust. Look very carefully the Individual who is going to be your boss and individuals who are going to be your peers and both should be individuals who highly respect and look upto.
Dhandho is a Gujarati word meaning business
Ask these 7 questions when investigating and buying any stock.