Do you think the only way to make money in investing is for stock prices to rise? If so, then in Charlie Munger’s view, you are very likely the man with the hammer. Munger said: To the man with a hammer, everything looks like a nail. You always think your investment method is best, yet you just don’t make money. The reason is simple: You invest for price differences, and you’ve been holding this unprofitable hammer all along. ...

Buffett said investing is simple but not easy. Today we won’t talk about the “not easy” half—just the simple part. As long as you start from common sense and understand Charlie Munger’s sit-back investing method, you’ll see that investing really is very simple! 90% of people invest like this: they constantly open their phones, look at the market, look at candlestick charts, then sell this and buy that. I used to be like that too, busy all day. Tiring, yes—but the key thing is, I didn’t make much money either. ...

80% of people get the first step of investing wrong. They’re busy buying and selling all day, with no time to stop and think about why their investing keeps failing and what to do about it. Are you like I used to be? When investing, you’ve had this experience: You worked hard for years and finally saved some money. But as soon as you enter the market, you buy, buy, buy, and simply can’t stop. The result is small gains and big losses. After three to five years, there’s less and less money in your pocket. If you’d known this would happen, you might as well have put it in the bank. ...

After so many years of investing, has your investment return beaten the index? If not, then at least it should have beaten government bonds, right? What? It didn’t? Then your opportunity cost is huge. In Buffett’s view, if your investment return can’t beat government bonds over the long term, why not just buy government bonds? Here, government bonds are your opportunity cost. Duan Yongping holds the same view: The minimum opportunity cost in investing is the risk-free government bond yield. ...

If you’ve always lost money investing in the past, it may not be because you weren’t hardworking or weren’t lucky. 80% of the reason is that you did two things you shouldn’t have. First, you clearly knew a company wasn’t great, but as soon as the stock price rose, you couldn’t resist buying. Second, some businesses were too hard to understand. You thought you understood them, but you didn’t, and you bought them anyway. ...

After reading this passage from Charlie Munger, 90% of your investing problems will be solved! Why? Because this passage goes straight to the underlying logic of investing: Buying a stock is buying a company. Munger put it this way: Over the long term, investment returns are very unlikely to be much higher than the company’s average annual profits. If a company’s return over 40 years is 6%, and you hold this company during those 40 years, even if you bought at a very cheap price early on, your return won’t differ much from that 6%. Conversely, if a company’s return over the past 20 years is 18%, then even if you buy at an expensive price now, the returns you get in the future will still be very substantial. ...

95% of people haven’t understood a very simple investment principle: Why concentrate your investments? Simple. Investing is doing business. So you should do it like a business owner: within your circle of competence, truly understand one or two good businesses, then patiently wait for a buying opportunity, concentrate your investment, hold long term, and you can become very rich. In Charlie Munger’s view, a person has only a few big opportunities in life. Investing is no exception. Good opportunities are extremely rare. Once one appears, you must dare to bet heavily and concentrate your investment. ...

You’ve been investing for a long time. Why haven’t you made much money? The reason very likely lies in the moat. You know to invest in highly profitable companies. That’s not wrong. But when competitors see it, they also want a piece of the pie. What follows is an increase in product supply, falling prices, and thinning corporate profits. Such a company has no moat. If you invest in these companies, it’s no surprise you don’t make money. ...

What kind of business is a good business? Read on and you’ll fully understand why some companies become cash-strapped the more they grow, while others become richer and richer. When you invest, do you ever have this question: This company looks very profitable, so why doesn’t it have much cash on its books? One of the biggest reasons is that it plows most of the money it earns back into the business—building new factories, upgrading equipment—so in the end, of course, there isn’t much left in its own pocket. That’s a typical bad business. It looks profitable, but in reality it hasn’t earned anything. ...

Have you ever felt this way? You’ve clearly done deep research on a company. From its business model and corporate culture, everything looks good. But its valuation never comes down, so you never dare to pull the trigger. Then a few months later, you look back and find the price has risen a lot more, making it even harder to buy. So you keep slapping your thigh and sighing, “Man! If I’d known this would happen, I should have bought it!” ...