Warren Buffett said, “Be certain,” and here’s how you’re going to be certain. If you buy a wonderful business at an attractive price, you’re certain to make money. It’s essentially like buying a $10 dollar bill for five bucks. You focus on a couple of key things to make sure you know what you’re getting.

So, what is a wonderful business? 

A wonderful business is understandable, and we’re passionate about it. We call that the meaning of the business. It’s durable, we call that the moat. Like the water around a castle protects it from attack. 

The CEO is honest, passionate, and owner-oriented, and we call that management. Those are the first three M’s. We make sure that we understand all three M’s before we go forward, then we look at the price.

Ben Graham, who taught Warren Buffett how to do this said, “The three most important words in investing are margin of safety”.

The margin of safety is a measure of how “on sale” a company’s stock price is compared to the true value of the company.

You need to be able to determine the value of a company and from that value determine a “buy price”. The difference between the two is the margin of safety. The goal is to find wonderful companies for 50% off their actual value. This allows you to purchase a company when it is undervalued at a price that all but guarantees a great return on your investment.

This week on InvestED, Phil and Danielle discuss Phil’s investing checklist in-depth and explain why it is the essence of Rule #1 Investing, as well as value investing as a whole.

If you want to learn more about the Four Ms of Rule #1 Investing, check out this guide where I explain these principles more in-depth: https://bit.ly/3eZYvPQ

Topics discussed in this episode:

Learn more about your ad choices. Visit megaphone.fm/adchoices

William Albert Ackman is an American investor and hedge fund manager. He has a well-known 8-point investing checklist, which is straightforward and reflects the basic principles of Rule #1 Investing.

That checklist includes only investing in simple and predictable businesses with a dominant market position, limited risk, a strong balance sheet, excellent management, high return on capital, free cash flow generative, and large barriers to entry.

Sound familiar?

There’s a lot of talk in the financial community about “diversification,” which simply means investing your money in a variety of ways in order to provide a safety net should one investment go south. The thing is, you don’t need to diversify if you know how to invest and understand what you are investing in.

By taking the time to research and learn about the companies you are investing in, you are providing your own safety net, because you won’t invest in any company that doesn’t meet the standards for a wonderful company, as it is defined in Rule #1 Investing. That is key. 

This week on InvestED, Phil and Danielle discuss Bill Ackman’s checklist more in-depth, and explain why you can’t blindly put your money in stocks chosen at random and expect to achieve great returns.

In order to succeed investing in the stock market, you have to use a system and a strategy. Learn how to find and pick quality stocks with this FREE Four Ms Guide: https://bit.ly/3krSdvB

Topics discussed in this episode:

Learn more about your ad choices. Visit megaphone.fm/adchoices

Michael Burry is an American investor, hedge fund manager, and physician. Burry is one of the most renowned names in the hedge fund industry, managing over $1 billion in assets.

Michael Burry has been in the news recently after regulatory filings revealed that he had PUT options on more than 800,000 shares of Tesla (TSLA). 

There has also been information released on which stocks he plans to sell, including The Allstate Corporation (ALL), Discovery, Inc. (DISCA), The GEO Group, Inc. (GEO), and Ares Capital Corporation (ARCC).

But what can people do with this information?

Coattailing is a popular technique in investing. When you use coattail investing strategies on some of the best investors, you’re essentially looking and copying the people who we know have made enormous rates of return over 20 and 30 year periods of time. Some examples of these types of investors are Michael Burry, Charlie Munger, Warren Buffett, David Einhorn, and Bruce Berkowitz.

So, how can you coattail the best investors? 

Investors who manage more than $100 million dollars have to file what they bought and what they sold every quarter with the SEC. All you have to do is look it up. It’s free information.

Find out what investors you want to copy and then go to the SEC website and look at what they are buying and selling every quarter.

They have to file every 90 days, so check to make sure the price of the stock is still around what they paid for it. If you like the company, which is critical, apply the Four Ms of investing and make sure it’s on sale for an attractive price.

In this episode of InvestED, Phil and Danielle discuss Michael Burry’s 13F filings and why it’s important to do your own research as an investor.

If you want to learn more about finding quality stocks based on the Four Ms of investing, download this FREE guide: https://bit.ly/3r4L2Lb

Topics discussed in this episode:

Learn more about your ad choices. Visit megaphone.fm/adchoices

“I don’t mind not making money on something that I’m not sure about.” - Phil Town

If a company has never had an event but appears to be on sale, is it a good investment?

Meeting the requirements of the Four Ms and the Big 5 Numbers just proves that a company is worthy of being on your watchlist, but doesn’t give you the green light to buy just yet. 

As Rule #1 Investors, we want to buy wonderful companies, yes, but only when they are at the right price. That’s why the last step is to wait patiently to buy stocks when, and only when, they go on sale. Buying a stock on sale helps take the risk out of investing and makes it easier to get fantastic returns. The key to finding stocks on sale is to wait for a Rule #1 event.

A Rule #1 event is when something happens that affects the entire market and makes the stock price of a good company drop far below its real value. This could be a recession, a pandemic, an election, you name it. 

Remember, the stock price doesn’t reflect the actual value of the company. We know that the company’s price will bounce back in time, and because we take a long-term approach to investing in stocks, we aren’t worried.

During an event, when others are panicking, we can take advantage of the downturn and buy wonderful companies at a tremendous discount.  

In this vault episode, Phil and Danielle discuss why as a Rule #1 investor, it’s critical to take advantage when stocks go on sale. 

Learn how to prepare for the next Rule #1 event with Phil’s Ultimate Stock Market Crash Survival Guide: https://bit.ly/2UuIhGS 

Learn more about your ad choices. Visit megaphone.fm/adchoices

“We both (Charlie Munger and Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.” ― Charles T. Munger

This further proves the point that reading is so fundamental to being an investor. 

Start with what you know and with what you love. If you don’t understand a business as if you owned the company, stop and move on to the next company. This is the most important, and perhaps the easiest to overlook, part of Rule #1 investing.

When you think of buying stocks, think of it as purchasing the entire business. Once you find a business that you love, your next step is to research the company inside and out, by reading 10-K reports and any articles you can get your hands on.

You can start by thinking about all of the things you are talented at, and make a list. This can be things like running, playing piano, creative writing, and more. Next, think about where your passions lie. Maybe you love reading, seeing new movies, or giving back to the community! Lastly, make a note of all the ways you’re already spending your money. Do you go out to eat? Do you buy new clothes regularly? Do you travel a lot? These are things you might want to consider when finding excellent companies to invest in.

In this episode of the InvestED podcast, Phil and Danielle discuss more of their favorite Charlie Munger quotes, and explain why researching companies you already know and love is a critical step in investing.

Learn how to pick Rule #1 approved stocks with this 3-Circles Guide. Click the link here to download: https://bit.ly/3x7ABcb

Learn more about your ad choices. Visit megaphone.fm/adchoices

William Green is a journalist and author of Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life.

Over the last quarter of a century, he has interviewed many of the world’s best investors, and has written for many leading publications in the US and Europe, including The New Yorker, Time, Fortune, Forbes, Barron’s, Fast Company, Money, Worth, Bloomberg Markets, The Los Angeles Times, The Boston Globe Magazine, The New York Observer, The (London) Spectator, The (London) Independent Magazine, and The Economist.

In Richer, Wiser, Happier, William Green draws conclusions on interviews that he’s conducted over twenty-five years with many of the world’s greatest investors. As he discovered, their talents extend well beyond the financial realm and into practical philosophy. 

The best investors in the world try to stay intensely rational. They try to get emotion out of their decisions and stick to the facts.

As an investor, you must ask questions but also do the homework. You'll learn how to avoid emotion, how to be patient, how to properly research, and how to think like this business is the only one you'll ever get to own. 

This week on InvestED, Phil and Danielle present the second half of their interview with William Green. They discuss investing, staying resilient, and why it’s important to be knowledgeable as an investor.

Value Investing requires staying rational. Learn what it takes to be a successful value investor with Phil’s NEW Value Investing Cheat Sheet: https://bit.ly/3wNJ97U

Get a copy of William Green’s Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life here: https://bit.ly/35kYlNK

Learn more about your ad choices. Visit megaphone.fm/adchoices

William Green is a journalist and author of Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life.

Over the last quarter of a century, he has interviewed many of the world’s best investors and has written for many leading publications in the US and Europe, including The New Yorker, Time, Fortune, Forbes, Barron’s, Fast Company, Money, Worth, Bloomberg Markets, The Los Angeles Times, The Boston Globe Magazine, The New York Observer, The (London) Spectator, The (London) Independent Magazine, and The Economist.

In Richer, Wiser, Happier, William Green draws conclusions on interviews that he’s conducted over twenty-five years with many of the world’s greatest investors. As he discovered, their talents extend well beyond the financial realm and into practical philosophy. 

The most successful investors are iconoclasts who question conventional wisdom and profit vastly from their ability to think more rationally, rigorously, and objectively. But this is easier said than done when you are investing real money. Money you can’t afford to lose tends to be ‘hot’ or emotional. Pro gamblers try to avoid sitting down with more than they can lose but anyone investing all of their own hard-earned money is always sitting down with more than they can lose. Fear of losing more than you can afford to lose tends to make the mind go irrational. You start guessing.

You can’t tell the difference between a good idea and a bad idea. Investing decisions are not life and death decisions, but remaining rational in the face of intense emotions is an art that is learned in the trenches.

This week on InvestED, Phil and Danielle sit down to speak to William Green about investing, staying rational, and why you don’t need to be an expert to invest successfully.

Value investing requires staying rational. Learn what it takes to be a successful investor with Phil’s NEW Value Investing Cheat Sheet: https://bit.ly/3wpZKhF

Get a copy of William Green’s Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life here: https://bit.ly/35kYlNK

Learn more about your ad choices. Visit megaphone.fm/adchoices

“Spend each day trying to be a little wiser than you were when you woke up.” — Charlie Munger

That assertion is so powerful, but it’s easy to overlook how critical it is. The whole idea of Rule #1 Investing is researching and learning about companies that you love, and buying stocks at attractive prices. Part of researching a company is ensuring it has a margin of safety, good management, meaning to you, and lastly, a moat — or competitive advantage.

Let’s focus on moat, for example. Charlie Munger loves Coca-Cola. He said that “Coca-Cola is the perfect business because it has this gigantic durable competitive advantage, or moat, which gives it predictable cash flow.” This allows us to figure out what the future cash flow will be and value the company today, so we know whether we can buy it on sale or not.

Your job as an investor is to research industries you already understand, so you can recognize companies with strong moats. An example of a brand moat is Harley-Davidson’s notorious lifestyle branding. This approach has huge potential for brand building, and Harley is brilliant at it. They’ve built a lifestyle around the Harley-Davidson culture which will always be tough for competitors to compete with. These companies don’t come around often.

Charlie Munger believes there are only a small number of real opportunities to get very high returns with very low risk. Maybe 20 in a lifetime. He said that if you remove the 10 best deals Warren and he ever did, Berkshire would have average market level performance. The only way to get those kinds of returns is to wait for the right opportunity to come along.

In this episode of the InvestED podcast, Phil and Danielle discuss more of their favorite Charlie Munger quotes.

Learn how to pick Rule #1 approved stocks with my Four Ms of Successful Investing Guide! Click the link here to download: https://bit.ly/3puoNO4

Learn more about your ad choices. Visit megaphone.fm/adchoices

“We recognized early on that very smart people do very dumb things, and we wanted to know why and who, so we could avoid them.” — Charlie Munger

The best investors in the world use the same principles. They have been around since the 1930s and they are still practiced today by the best investors in the world, including Charlie Munger, Warren Buffett, David Einhorn, and Mohnish Pabrai.

One of those principles includes staying intently rational. But this is easier said than done when you are investing real money. Money you can’t afford to lose tends to be “hot” or emotional. 

Pro gamblers try to avoid sitting down with more than they can lose, but anyone investing all of their own hard-earned money is always sitting down with more than they can lose. Fear of losing more than you can afford to lose tends to make the mind go irrational. You start guessing.

A way you can stay rational in uncertain times is to understand what companies you’re buying as if they were your own. Stick with what you know, and realize what you don’t know. 

Focus your attention on industries that you’re already comfortable with, and love what you own. Put your money where your values are. Most of us have the intention to make the world a better place, but seem to forget that the businesses that we invest in have a direct impact on what is going to exist in the world in 20 years.

In this episode of the InvestED podcast, Phil and Danielle discuss more of their favorite Charlie Munger quotes, and how they impact their investing decisions. 

Learn more about investing like Charlie Munger and Warren Buffett with this FREE Investing for Beginners in 2021 Guide. Click here to download: https://bit.ly/3wJHj7m

Learn more about your ad choices. Visit megaphone.fm/adchoices

Inflation is the devaluation of a currency’s buying power. It occurs over time as the government pumps money into the economy and there’s a larger money supply buying a relatively fixed amount of stuff.

Let’s say you’re 50 years old. You want to retire in 10 years at age 60 - we’ll figure 30 years in retirement and you’re putting money into a 401(k). Let’s assume you started with $100,000 today in your 401(k) and then contributed $2,000 a year into it because you’re putting your kids through college and that’s all you can put away.

In 10 years, you would expect to make around 6% in your 401(k) (if your employer isn’t matching your money). A reasonable inflation rate is probably going to be about 3%. What this means is that in 10 years, when you’re ready to retire, at 6% with an inflation rate of 3%, you end up with $205,000 to retire on.

Let’s assume that you’re going to live on $50,000 a year. You’ve got $205,000 right now, but 10 years from now it won’t be worth that at all. Inflation affects everything including the costs of living, so your $50,000 is going to be $67,000 a year to live that same basic $50,000 a year lifestyle. Even if you keep investing the money at 5% or 6%, inflation continues at 3%.

How many years will you be able to live in retirement before you completely run out of money, spending only $50,000 a year in today’s dollars? The answer is 3 years. If you were to not learn how to invest, you’d need to come up with another $1.3 million to live on for 30 years.

If you change your 6% return to 15%, you’re going to make a lot more money. 15% is in the range of a return that’s doable for any investor. What happens then? We’re going to keep all the things the same, but we’re going to increase the rate of return to 15%. At that point, your number becomes $540,000 and you’re only short about $96,000 to make it all the way through those 30 years of retirement.

This week, Danielle and Phil discuss the impact inflation has on our investing practice. They also talk about Buffett’s solutions for “little guy” investors, and how we can set ourselves apart from others through our investing education. 

Learn how to invest with more confidence and less risk with this free Investing for Beginners in 2021 guide. Click here to download: https://bit.ly/3urGezS

Learn more about your ad choices. Visit megaphone.fm/adchoices