Investing principles
Published:Wednesday | September 14, 2011 | 12:00 AM
Don't Buy Without Value
The difference between a great company and a great investment is the price you pay. There were many fantastic businesses around in year 2000, but very few of them were attractively priced at the time. Finding great companies is only half the equation in picking stocks; figuring out an appropriate price to pay is just as important to your investment success.
Always Have a Margin of Safety
Unless you unlock the secret to time-travel, you will never escape the inherent unpredictability of the future. This is why it is key to always have a margin of safety built in to any stock purchase you may make - you will be partially protected if your projections about the future don't exactly pan out the way you expected.
As you have seen in recent lessons, having a margin of safety is a recurring theme among several great investors. This is no accident: margin of safety really is that important.
Think Independently
Another common characteristic you will find is that great investors are willing to go against the grain. You should find zero comfort in relying on the advice of others and putting your money where everyone else is investing. Quite simply, it pays to go against the crowd, because the crowd is often wrong.
Also remember that successful investing is more about having the proper temperament than it is about having exceptional intelligence. If you can keep your head while everyone else is losing theirs, you will be well ahead of the game - able to buy at the bottom, and sell at the top.