React with Equanimity

Equanimity is the ability to remain calm under pressure. It means having an even mind, and it's a crucial factor in investing. If you can control your temperament you will greatly improve your chances of success.

 
Keep your balance and stay calm as an investor. It's important to cultivate a sense of equanimity and react to market fluctuations with patience.

Keep your balance and stay calm as an investor. It's important to cultivate a sense of equanimity and react to market fluctuations with patience.

 

If you are a mutual fund investor, you should adopt the mindset that you will make periodic investments over the long haul, and you should not pay the slightest attention to whether the market is going up or down. Your goal should be to make monthly investments through thick and thin...and especially through thin, since that's when you get to buy shares cheap.

If you are a stock investor you should see your goal is to buy shares of great companies and hold them for years. At least 5 years, and preferably 10, 20, 30 years or forever. The other approaches to so-called "investing," namely day trading, speculating on stock options - are all gambles.

Charlie Munger and his business partner, Warren Buffett, who together run Berkshire Hathaway believe that the passage of time is the friend of the investor or business person and impatience his or her enemy. When asked once about whether he was worried about a big drop in the value of Berkshire Munger said succinctly:

“Zero.  This is the third time Warren and I have seen our holdings in Berkshire Hathway go down, top tick to bottom tick, by 50%.  I think it’s in the nature of long term shareholding of the normal vicissitudes of worldly outcomes of markets that the long-term holder has his quoted value of his stocks go down by say 50%.

"In fact you can argue that if you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations.” 

Stay calm despite market fluctuations and keep a calm mind. It's a key factor to your investing success.

A New Way to Invest

The main ideas about successful investing have not changed much since Benjamin Graham wrote "The Intelligent Investor" in 1949. If investing fundamentals have not changed much in 70 years,  do we really need another investing book?

Yes, because while the important investing concepts have not changed, many companies use technology to grow and compete. The modern investor needs updated tools to decide which investments make sense.

When Graham wrote about investing, companies like American Motors, Brown Shoe, Studebaker, Collins Radio, Detroit Steel, Zenith Electronics, and National Sugar Refining were Fortune 500 companies. None of these companies exist today, although many companies from that epoch survived: Boeing, Campbell Soup, Disney, Coca Cola, McDonald's, Whirlpool, and GEICO are among the stocks that Ben Graham and Warren Buffett studied and invested in seven decades ago.

A new kind of company dominates the business landscape today.  Amazon, Adobe, Apple, Facebook, Google, Netflix, Nvidia, Microsoft, Starbucks and Tesla epitomize the modern company whose success or failure depend upon adapting to rapidly changing technologies. Their growth is on a different scale than companies of the past, and companies like Amazon and Tesla forego profits today in efforts to dominate their industries tomorrow.

 
sachin-globe.png
 

Today's investors need a new set of tools to evaluate stocks. They don't need complex tools, they need simpler tools. I see many beginning investors buying stock because the price is going up, and they think the company is going to make them rich - even though the company does earns a small profit - or no profit today.  In order to avoid the disastrous results which almost always follow speculation, the modern investor needs a checklist and a systematic process to evaluate companies that will compound invested dollars for years to come while protecting investors from losing money.

Today's fast-growing companies need to adapt, grow, experiment and pivot in new ways, and today's investor needs new tools for evaluating these companies. 

Ben Graham's most successful student, Warren Buffett, had to adapt Graham’s “deep value” investment philosophy of buying cheap stocks in low-quality companies so he could improve his results by paying up to buy stocks of higher quality companies.

Yet despite his ability to adapt the way he invests, Buffett has recently admitted to missing "big time" when it comes to opportunities to invest in companies like Google and Amazon, which he admires and understands.

Buffett’s strict desire to avoid paying too high a price has prevented him from investing in Amazon, for example. However, a successful modern investor needs flexibility when it comes to the price paid for technology stocks.  Companies with seemingly limitless potential for future growth often sell at high prices compared to more stable, predictable, traditional companies.  Today's investor needs to be able to assess which companies make most sense, and be flexible enough to “pay up” for a growing company with a solid business, product, or platform and a clear path to profits.

New eyes bring new ideas. It was not until Buffett hired Todd Combs and Ted Weschler to help him invest at Berkshire Hathaway that the company changed; in 2016 Berkshire invested for the first time in Apple, the investing idea of either Combs or Weschler (Buffett never divulges which of them is responsible for specific purchases). The new idea of an Apple investment was such a smart one that it persuaded Buffett to make his own large purchase of Apple stock a few months later in 2017.

I do not have the hubris to think my book can improve upon the wisdom of the investing masters, however, I do understand the factors that make a great investment, and I can explain these concepts simply.

The Simple Investing Guide the value investing approach of pioneers like Benjamin Graham and Warren Buffett to help investors today to understand the five most important concepts that today's investors need to know before investing in rapidly growing modern companies.

 
The Simple Investing Guide adapts the traditional value investing concepts  to help modern investors grasp the five most important factors they need to know before investing in today's fast-growing companies.

The Simple Investing Guide adapts the traditional value investing concepts  to help modern investors grasp the five most important factors they need to know before investing in today's fast-growing companies.

 

This book brings the old-style of investing into the modern age. It's the "next step" that carries the torch of Graham and Buffett’s rational approach and shows you how to adapt their concepts for investing in companies from Activision Blizzard and Adobe Systems to Zimmer and Zoetis. No matter who you are or how you invest, this book will provide you with useful tools to invest for your future.

Available for purchase on Amazon beginning December 12, 2017.