Why do 90% of people find investing hard? Because very few people are willing to get rich slowly. Because they lack money, they want to make quick money. Because they want to make quick money, they want shortcuts. Because they want shortcuts, they ask everywhere for tips. “Don’t give me a bunch of principles—just give me the ticker code.” But the key problem is: Knowing the what but not the why. Even if you get lucky and buy a good company, as soon as the stock price fluctuates a little, 99% of you won’t be able to hold on. That’s the hardest part of investing.
In Munger’s view, to make investing relaxed, you rely on remembering the obvious, not the profound. These principles together can be counted on ten fingers. The father of securities analysis, Graham, left three: equity thinking, Mr. Market, and margin of safety. On this foundation, Buffett added three: circle of competence, concentrated investing, and long-term investing. Together, these principles form the basic philosophy of value investing. Today I want to talk about equity thinking.
Among these 6 investment principles, equity thinking is the most important. I can’t emphasize it enough. Building a house requires a solid foundation. Equity thinking is the foundation of investing. Whether the foundation is solid directly determines whether you can keep making money in investing.
So what exactly is equity thinking? Simple: You must genuinely accept the sentence “buying a stock is buying a company.” A stock is part of a company’s ownership. What you buy is not a piece of paper or a string of codes, but a real, existing company.
Buying a stock is buying a company—this is originally a fact and also common sense. Truly understand these 8 words and do two things: First, find good companies. Second, buy and hold good companies long term. Then investing becomes very easy!