InvestED: The Rule #1 Investing Podcast

There are two extremes of Warren Buffett’s Investing Strategies, and one of those extremes is Net-Nets. The Net-Net Strategy was actually developed by economist Benjamin Graham, who Buffett studied under after graduating from Columbia. The Net-Net strategy is generally seen as an extremely conservative investment strategy, and after following it throughout the great depression, Benjamin Graham saw...

After walking through the first few steps of the Investing Checklist -- Munger’s 4 Principles, Ackman’s 8 Point Checklist, basic valuation, and research -- what comes next? A good place to start is by choosing a company or industry that’s relatively easy for you to understand and practice digging deeper in research using the checklist...even if you don’t end up investing in that company. Join Phil...

Sometimes the best thing you can do when it comes to investing successfully is nothing...at least until you know you’re 100% right about where you’re about to put your money.  This week on InvestED, Phil and Danielle discuss the critical step to take after you’ve made it through the Investing Pyramid and before diving deeper into the investing checklist: Having Patience & Staying Simple. It’s no s...

So you’ve made it through the first two steps of the investing pyramid and are now wondering what comes next? In this episode, Phil and Danielle walk through the first few steps of the Investing Checklist, explaining the importance of basic valuation, company research, and how your decision to include a company in your portfolio should be an iterative process. You’ll also learn about helpful resou...

When it comes to finding the right investments for your portfolio, there are a few steps you should take in order to make sure you’re making the best decision. These steps include understanding the business you’re interested in adding to your portfolio, finding a rational, trusted partner to bounce ideas off of, and completing each level of the 3-step investing research pyramid. This week, Phil an...

When it comes to investing you should never go faster or do more than what you’re ready for. If you do, you’re going to crash. Phil and Danielle discuss the importance of taking small steps and being patient with your comfort in investing in order to see success. Taking your ego and hubris out of your investing process is going to be critical to success. While you may be excited and sometimes feel...

Debt matters. So how do you find the value of a company you want to invest in if they’re carrying around debt? Stemming from a conversation about the role of debt in Liberty Media Corporation’s purchase of Formula One Racing from last week’s episode, Phil and Danielle dive deep into a conversation about how to use the 10 cap formula to accurately find the true valuation of the company you’re inves...

So you invested in a business...but do you know who ACTUALLY owns that business? Do you know what the management is like and how that can drastically affect the success of your investment? For sports fans — especially racing fans — Formula One Racing (owned by Liberty Media Corporation) seems like an attractive stock to add to your portfolio, as it’s one of the few opportunities to invest in sport...

Buying stocks is not something that should be taken lightly. Selecting which companies to buy can make or break you as an investor. Before you buy shares in a company, it is essential to thoroughly investigate that company’s mission, management, goals, outlook, and fundamentals. Think of it this way: you would never buy 100% of a company without thorough due diligence, and, likewise, you shouldn’t...

Rule #1 has been the basis of excellent investing for the last 80 years by successful investors like Warren Buffett, and it will be the basis of excellent investing 80 years from now.  First, understand that Rule # 1 literally is “Don’t Lose Money,” but what it means in practical terms is to invest with certainty.  Certainty comes from this: buying a wonderful business at an attractive price. The...

“Invert, always invert” — Charlie Munger If you want to really be a great Rule #1 investor, you must have an investing strategy in place to help guide you.  You must create a story for the company you want to invest in and determine why this is a great company. Once you have that story, invert it by flipping to the opposite point of view.  You should try to create the argument that this investment...

If you’re doing it right, investing in the stock market is much more than picking a few companies, buying a few shares, and hoping for the best. Smart investors are those that are disciplined and have an investing strategy in place to help guide them as they go along with their investment choices. And that includes having a checklist to help you make important investing decisions. Rule #1 investor...

Why do stock market events cause stocks to go on sale? Let’s say that cotton prices start to go nuts because of the Arab Spring. Maybe they’re not going to harvest Egyptian cotton crops, so cotton prices go from $1 to $3. The guys who own companies that depend on cotton prices to be low look at the price and say, “Oh no. It’s going to take over a year before cotton prices come down, I need to get...

The key to finding stocks on sale is to wait for a Rule #1 event. What’s a Rule #1 event? It is when something happens that affects the entire market and makes the stock price of a good company drop far below its real value. This could be a recession, a pandemic, an election — you name it.  Remember, the stock price doesn’t reflect the actual value of the company. We know that the company’s price...

When it comes to investing, conventional wisdom says to hand your money over to a financial advisor and let them diversify your investments for you. Why think too much about where your money is going if you don’t have to? But there’s a problem with that mindset: your values matter and you should be investing in what you love.  Consistently pouring your life and efforts into the things you care abo...

In today’s episode, we discuss some words of wisdom shared from the letters of Warren Buffett. There is one concept in particular that we can take from these letters that still applies today, and that is inflation. First, we focus on Warren Buffett’s 1979 letter, where inflation rose to 11.2% in the United States. Buffett decided to write about this in the letter along with larger financial issues...

The Rule of 72 is a simple equation to help you determine how long an investment will take to double, given a fixed interest rate. It’s a shortcut that you, as an investor, can use to estimate if an investment will double your money quickly enough to be worth pursuing. When you see how quickly your money can double, you’ll understand the power of compound interest.  Compound interest is what makes...

Physical commodities are investments that you can physically own, such as gold, silver, natural gas, and oil.  Take gold, for example. The price of gold rises and falls, depending on the demand. Demand tends to go up only when people are feeling afraid or uncertain about the future. The problem with investing in gold is that you can’t accurately predict what the demand will be at any particular ti...

Physical commodities are investments that you physically own, such as gold, silver, natural gas, and oil.  A commodity stock has several key attributes:   Its products compete primarily on price, but it is not a low-price competitor. Its products are the same as another company’s products. It has no brand identification.  It can’t raise its prices with inflation or increasing costs.   Let’s take g...

“Sticker price is what I call the value of the business.” — Phil Town Why does Phil call it the Sticker Price? You know how you have a sticker on the window of a new car and it tells you what the price of the car is, and you never pay the Sticker Price? That’s why we named the value of the business the “Sticker Price.” Rule #1 investors never pay the Sticker Price. They always want to buy it at a...

Warren Buffett said, “Be certain,” and here’s how you’re going to be certain. If you buy a wonderful business at an attractive price, you’re certain to make money. It’s essentially like buying a $10 dollar bill for five bucks. You focus on a couple of key things to make sure you know what you’re getting. So, what is a wonderful business?  A wonderful business is understandable, and we’re passionat...

William Albert Ackman is an American investor and hedge fund manager. He has a well-known 8-point investing checklist, which is straightforward and reflects the basic principles of Rule #1 Investing. That checklist includes only investing in simple and predictable businesses with a dominant market position, limited risk, a strong balance sheet, excellent management, high return on capital, free ca...

Michael Burry is an American investor, hedge fund manager, and physician. Burry is one of the most renowned names in the hedge fund industry, managing over $1 billion in assets. Michael Burry has been in the news recently after regulatory filings revealed that he had PUT options on more than 800,000 shares of Tesla (TSLA).  There has also been information released on which stocks he plans to sell,...

“I don’t mind not making money on something that I’m not sure about.” - Phil Town If a company has never had an event but appears to be on sale, is it a good investment? Meeting the requirements of the Four Ms and the Big 5 Numbers just proves that a company is worthy of being on your watchlist, but doesn’t give you the green light to buy just yet.  As Rule #1 Investors, we want to buy wonderful c...

“We both (Charlie Munger and Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.” ― Charles T. Munger This further proves the point that reading is so fundamental to being an investor.  Start with what you know and with what you love. If you don’t understand a business as if you owned the com...