Garrett nailed it when he wrote: "When you find yourself finally at the point where you really are frustrated to see the price of your company go up, you know you're now maturing into ... a Rule #1 Investor!"
Like Davey Crockett said (according to Walt Disney), "First be sure you're right. Then go ahead." I loved that line from the TV show. When I was 9 it made so much sense. Life is easy. Just be sure you're right, then go ahead. Then I grew up and volunteered for the Army during Vietnam, married and divorced twice, got all into a guru in India and thought a million dollars was a fortune. I've been wrong so many times down started to look like up to me. And all the while, I was seriously trying to follow Crockett's advice. My conclusion is that in life's decisions, only God knows for sure and the best you can do is follow a good set of rules about what's right and wrong. With investing, on the other hand, things are simpler. It is possible to "know you're right".
Knowing you're right starts with narrowing down the industries you will become an expert in to a manageable number. Start with one. Maybe fast food. Maybe coal mining. Or oil. Or motorcycles. Whatever you can get excited about; maybe things you like to spend money on. Whatever it is, know what it is and study it. Which company is the best and why and why it will continue to be the best for the next 20 years. We call this Meaning. It is fundamentally important to great investing results. Here's why:After you buy this stock, whatever it is, its going to go down. And when it does you are going to have to face your demons. Did you really understand this business? Is it really what you think it is? Do the sellers know stuff you missed? Or are you right? If you're not sure, where did you go wrong?1. You copied someone who you think knows more than you do.This is not a bad thing. Lots of people know more than I do. Some of them are smarter. Many of them have bigger research staffs. I'm going to piggyback on their ideas every time I can. But I'm still the final allocator of my capital. I can copy but I can't get out of the responsibility. If I cheat and copy but don't do the work, when the price goes down like a brick... oh oh.2. You did the work, sort of. You just didn't do it very well because you're lazy. So am I. I've just learned to work hard at this. This isn't a game where a high IQ beats a lower IQ but it is a game where getting all the info makes all the difference. And it takes work to get it. In the old days, getting the information was most of the work. Today its right there on the internet. But you do have to go get it and read it. Its not rocket science. You find out three things: 1) is it a great company? 2) what's it worth as a business? 3) is it on sale?. Do the work or when the stock price goes down ... oh no.3. You just have to be investing in something all the time. Get this: You aren't going to be smarter than the Big Guys. They went to Harvard. You had trouble getting in to Podunk State. I flunked out of Bellevue Community, okay? They are way smarter than you and me. If we don't have an edge, there is nothing we're going to figure out that they didn't already figure out. So what in the world could give us morons an edge over really smart guys from Harvard? Great investing for us little guys demand that the Harvard boys are scared to death. We need the power of fear. And fear doesn't happen every day. If you are finding great businesses on sale to invest in every day, when the price drops big time on one of them ... oh man.Slow down. Know you're right. And when you are, load up big time. Otherwise, chill out, be patient.No go play.
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