Is your investing order reversed? When buying, you’re casual and random. After buying, you always feel uneasy, obsessing all day: Did I buy wrong? Did I buy too expensive? Should I sell? A new idea every day, tormenting yourself every day. Why? Because you don’t know that true investing means doing enough homework when buying, and after buying, doing whatever you want! The end of investing is not fidgeting, but zoning out!
So what should you do? My suggestion is to read Poor Charlie’s Almanack more. After reading it, you’ll know that Charlie Munger’s understanding of investing can be fully condensed into one sentence: From the perspective of a business owner, within your circle of competence, seek out a few great companies with sustainable competitive advantages, buy them at a reasonable price, and then you can go fishing. Understand this sentence and you’ll see that before investing, do everything that needs to be done, and what’s left is zoning out. So what needs to be done? Simple, just three steps.
First, you must have equity thinking. Look at investing from the perspective of doing business, starting a company, and being a boss. Don’t let the market affect you, because all of that is noise.
Second, you must guard your circle of competence. Don’t be like Tang Monk, always unable to resist stepping outside the circle Sun Wukong drew for him.
Third, you must invest in the best companies. Good companies must be grasped as a whole. In Duan Yongping’s words, companies with good business models and good corporate cultures never disappoint. Don’t sell a good company just because it encounters a small problem or because one quarter’s financial data falls short of expectations. Why? Because selling a good company is easy, but buying it back is very hard!
True investing is like brewing wine. Take Moutai, for example. From putting in the ingredients to leaving the factory takes at least five years. The brewing time for Moutai is only one year. The other 80% of the time, it lies quietly in the vats. But the workers at the Moutai distillery are not anxious at all. Why? Because they know that four years later, bottles of fine Moutai will be ready to leave the factory. This is a certain and definite thing. Brewing is like this—why wouldn’t true investing be the same?
Based on my 16 years of investment experience and my current investment understanding, if you understand Buffett and understand value investing, 90% of your time should be spent in a state of non-action. You only need to determine two things: Is what you bought a good company? Is the price reasonable? If both are yes, then just zone out every day. You can zone out sitting, or zone out lying down—whatever is most comfortable for you!