31 min
Warren Buffett and Charlie Munger's 4 Principles of Investing (005) Investing Mastermind Podcast
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- Investing
Michelle Marki and Signe Lonholdt explain Warren Buffett and Charlie Munger's four principles of investing. Instead of blindly buying a stock, then waiting and hoping that the stock will go up in price, we carefully take the first step before we even buy the security. The difference is that instead of just hoping for an increase in the stock price, this first step will help you understand if the stock is trash or treasure since there are many aspects of a stock besides its price.
These investing principles are critical to understand if you would like to invest in stocks like the best investors of all time. The great news is these principles are not complicated to learn.
The first principle or the first step is what Buffett calls the "circle of competence," which is just a way of saying that you can understand the business. The second principle is "moat," which comes from the protective body of water surrounding a medieval castle. In the investing context, moat means a business's durable, competitive advantage(s). The third principle is "management," as in does the CEO have integrity and talent in running the company? The fourth principle is "margin of safety," which means to buy a wonderful company at a discount to its intrinsic value.
By buying the company at a lower price to its "real value," you would allow for some margin of error in judging what a company is really worth. While it's not easy, investing can really be this simple if you follow these steps diligently!
Michelle Marki and Signe Lonholdt explain Warren Buffett and Charlie Munger's four principles of investing. Instead of blindly buying a stock, then waiting and hoping that the stock will go up in price, we carefully take the first step before we even buy the security. The difference is that instead of just hoping for an increase in the stock price, this first step will help you understand if the stock is trash or treasure since there are many aspects of a stock besides its price.
These investing principles are critical to understand if you would like to invest in stocks like the best investors of all time. The great news is these principles are not complicated to learn.
The first principle or the first step is what Buffett calls the "circle of competence," which is just a way of saying that you can understand the business. The second principle is "moat," which comes from the protective body of water surrounding a medieval castle. In the investing context, moat means a business's durable, competitive advantage(s). The third principle is "management," as in does the CEO have integrity and talent in running the company? The fourth principle is "margin of safety," which means to buy a wonderful company at a discount to its intrinsic value.
By buying the company at a lower price to its "real value," you would allow for some margin of error in judging what a company is really worth. While it's not easy, investing can really be this simple if you follow these steps diligently!
31 min