Foreword by Phil Town
Warren Buffett says investing is buying an asset that produces cash flow for substantially less than it’s worth, like buying a $ 10 bill for $ 5.
She finally did the math and discovered that unless she was willing to be a wage slave for her whole life, accumulating enough money to have choices was nearly impossible without investing.
Introduction, or How to Use This Book
- a market crash is a natural part of the economic cycle that is going to happen whether I want it to or not.
Chapter 1: January—Becoming Brave
Rule #1 is Don’t Lose Money. Rule #2? Don’t Forget Rule #1.
Be so confident that you now own a great company that—even if the stock price goes down—you don’t worry and you stay with it until it goes back up and, ideally, you never sell. That’s how you “don’t lose money.” That’s Rule #1 investing.
To a man with a hammer, everything looks like a nail.
“The only way to simply maintain today’s buying power of the money you have is by making more money on your money.”
Chapter 2: February—Knowing Your Number
“Your Number is how much money you have to save before you can quit your job if you want to.”
“Exactly. Buffett says if you’re not going to learn to invest properly, then buying a low-fee index that tracks the market like the S& P 500 is the next best choice—acknowledging that you’ll get a market return of maybe 7 percent on average. Basically, you’re betting on America going up over time. That’s probably a good bet because America has a durable competitive advantage over other nations. We have a literal moat from two oceans, the world’s most powerful military, solid currency, a free press, and trillions of dollars to invest in the future. We also have brilliant minds, hard workers, great ethics, a culture of personal responsibility, fair taxation, and limited government intrusion.
But just investing in an index won’t get you the freedom you’re looking for, as I showed you, unless you have a lot more money to invest than you have.”
Chapter 3: March—Voting for a Mission with My Money
Chapter 4: April—The First Principle of Value Investing
“Exactly. You should be pleased because them selling will make the price go down, and that gives you the opportunity to buy.” That’s incredibly good news for me because that means I don’t have to be smarter than the pros on Wall Street; I just have to play by a different set of rules. Buffett’s rules.
When the market is rocketing to the moon and I’m being left behind, I keep my eye on the Shiller P/ E and the Buffett Indicator.”
Buffett called the ratio between the market as a whole and national revenue “probably the single best measure of where valuations stand at any given moment.”
“it’s better to buy a wonderful business at a fair price than a fair business at a wonderful price.”
- it must be a business he is capable of understanding 2. it must be a business with some intrinsic characteristics that give it a durable competitive advantage 3. he would like it to be a business that has management with integrity and talent and 4. it must be a business that he can buy for a price that makes sense and gives a Margin of Safety.
The hard part was going to be discerning when the fear was irrational and when it was warning me of real danger.
Buffett has about $ 100 billion in cash right now, and none of that shows up in his 13F filings. If you didn’t know about how much cash he’s keeping, you’d think he was fully invested, when in fact, he’s sitting on the largest pile of cash in his whole life just waiting for the inevitable economic storm to put everything on sale that he wants to buy.”