Introduction

Every day, thousands of extremely intelligent, hard-working people work long hours in Wall Street, London and other money centers of the world. Most of them get mediocre investment returns. Their clients do even worse, because they pay some part of their less than average returns to these professionals. In worst case, these professionals create weapons of financial mass destruction. The investment vehicles so complicated that nobody can understand them, including their creators. Majority of investing professionals belong to these aforementioned, high paid groups. I don´t know if these facts are tragic or scary. These people have enormous potential of doing good things in some other area of expertise and then they waste it for mediocre results in the financial markets.

A very small minority of investment professionals have proven track record of outsucceeding most of the professionals with significant margins for at least over ten years and/or they have created universal and timeless investing principles. They are the best skilled, most knowledgeable, and wisest investors we have seen. These people do things differently. There is no other possibility, because consensus view is in the prices in financial markets. Betting against consensus doesn´t mean you are right. There has to be a well thought reason to do this. To get better probabilities of getting better than mediocre investment returns, you need to understand how and why the best investors do things differently. These lessons are for you to learn these reasons.

There are basically two reasons why most of the professionals do not get better results for themselves and their clients. First, financial markets work that way as a system. System in which most professionals work, has a tendency of concentrating on the basis of consensus view. It is probably right in the short term. And short-term success is what most professionals are measured and paid for. Betting against consensus is what gets you fired, unless you are right. Acceptable mediocrity is therefore better for the professional. Second, the most important attributes for the best investment success are certain character traits. Most of these character traits work better in the long-term.

The most famous and maybe the best investor in the history of the world, Warren Buffett, defines investing as ”Transferring your current purchasing power to someone else´s use, in order to have a probable bigger purchasing power in the future”. All these lessons are for getting better probability of increasing your purchasing power in the future. All of these great investors have this goal or a goal for getting better probability of not losing purchasing power. All the investors have these goals. Principles and methods can be different. These lessons are for increasing probabilities for the long-term investors. They are unlikely to work in the short term.

These lessons are about the investment principles of the wisest and most skilled investors on earth and how to use these principles. I will cover their investing mistakes too. And what I believe are their blind spots in thinking about business and investing. Methods of using principles may vary, but fundamental truths are the same. Most of the situations occurring are just one of those. These situations have repeated through history. Most of them are not completely similar, but very close to each other. History doesn´t repeat, but it rhymes. You can apply certain principles only when similarities of things happening right now are very close to what happened before.

All the principles are not for you. You are different compared to these investors. You have to make a decision, whether individual principles are good match for your values, character and abilities. I will try to help you by giving my opinions to whom these principles can work for. Do not accept any principle or my opinion about it without thinking independently. Ask two questions:

1. Does this principle or method match with my values, character and abilities?
2. What should I do about it?

Nobody can use all the principles. Choose with creat care. You don´t need to have the same principles as these great investors. Have your own principles and design them for your values, character and abilities. Whatever you choose, operate with chosen principles. Use them, when you are sure about the right timing.

These lessons are trying to be designed to be as simple as possible, but no more simpler. Investing is an activity, in which oversimplification, as well as overcomplexification, lead to completely wrong answers. One of the important intellectual characteristics of these great investors is the ability to simplify complex things as much as possible. It is one of the hardest things to do in life. These lessons have no complex mathematical formulas. Simple calculations are all you need. The amount of investing terms is kept minimal. They are only used, when it is the only way of explaining things. These lessons are not for the people who have started investing. Some of the terms are not explained, because I assume you are aware of what they mean. These lessons need independent thinking too. Without any knowledge or experience about investing they may only confuse the reader.

All the investors I introduce have their own lessons. You should go through the lessons investor by investor. I will post lessons mostly once a week. Going through them too fast may cause you trouble in understanding them. Each lesson requires lots of thinking. They contain one question to think about as a homework. The exceptions are the introductions about the investors. Lessons are in particular order for a reason. You should go through them in the right order, which is the order I am presenting them. I don´t recommend skipping any lessons, unless you are sure they are not useful to you. Some of the lessons have more advanced and detail-oriented information about the previous lessons. Some of the lessons may seem shallow, but deeper understanding requires thinking them thoroughly and independently.

These posts have lessons at least from the next investors: Benjamin Graham, Philip A. Fisher, Warren Buffett, Peter Lynch, John M. Templeton, Ray Dalio, Jim Rogers, John C. Bogle. Possibly from Charlie Munger Carl Icahn and William J. O´Neil. These lessons are mostly based on sources you can find from here. I recommend you to check them yourself, depending on the amount of freetime and interest you have. The best lessons are from the investors themselves. There are no misinterpretations between them and my understanding about the lessons.

Feedback is welcome. I am not a native English speaker. Any feedback about the language is very useful. And all the comments and feedback about the lessons are welcome and useful too. You can send comments about the posts or send some e-mail to tommisalmanack@mail.com.

© Tommi Taavila 2018