Module Units
- 1. Introduction
- 2. Investment In Yourself
- 3. Become A Learning Machine
- 4. Obtain Worldly Wisdom
- 5. Harnessing The Power Of Passion
- 6. The Importance Of Choosing The Right Role Models
- 7. Humility Is The Gateway To Attaining Wisdom
- 8. The Virtues Of Philanthropy And Good Karma
- 9. Simplicity Is The Ultimate Sophistication
- 10. Achieving Financial Independence
- 11. Living Life According To The Inner Scorecard
- 12. Delayed Gratification
- 13. Building Earning Power
- 14. Investing Between The Lines
- 15. Decision-Making
- 16. Checklist For The Standard Causes Of Human Misjudgment
- 17. Journaling
- 18. Power Of Incentives
- 19. Avoid Physics Envy
- 20. Intelligent Investing
- 21. The Three Most Important Words In Investing
- 22. Investing Is All About Capital Cycle
- 23. Analyzing Special Situations
- 24. The Holy Grail Of Long-Term Investing
- 25. Connecting The Dots
- 26. Market Is Not Efficient All Time
- 27. The Dynamic Art Of Portfolio Management
- 28. To Finish First, You Must First Finish
- 29. Read More History And Fewer Forecasts
- 30. Updating Your Beliefs In Light of New Evidence
- 31. Opportunity Costs
- 32. Pattern Recognition
- 33. Role of Luck, Chance, Serendipity, And Randomness
- 34. Value Investor
- 35. Conclusion
Simplicity Is The Ultimate Sophistication
The author emphasizes simplicity as it helps us make better decisions by breaking down complex problems into parts.
For example, one should ask four inverted questions whenever they are looking at a stock. These questions break the mindset of finding supportive bullish reasons and force you to seek out disconfirming evidence actively.
1. How can I lose money? Versus How can I make money?
Again, if you focus on preventing the downside, the upside takes care of itself.
2. What is this stock not worth of? Versus What is this stock going to be worth?
If you can identify the floor price or a low price for a stock.
3. What can go wrong? Versus What growth drivers are there?
Rather than focusing on the growth catalysts, think probabilistically about a range of possible outcomes, and contemplate the potential risks, especially those that have never occurred.
4. What is the growth rate being implied by the market in the current valuation of the stock? Versus What is my future growth rate assumption?
a reverse discounted cash flow fleshes out the current assumptions of the market for the stock. Then the investor can compare the market’s assumptions with their own and make a decision accordingly.
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