Investors should develop an investment framework which they make their decisions around. They should have tenets by which they abide in order to avoid permanent impairment of capital, while generating above average returns. Below are ideas from various others frameworks that are useful.
“Charlie (Munger) realizes that it is difficult to find something that is really good. So, if you say ‘No’ ninety percent of the time, you’re not missing much in the world.” – Otis Booth
Buy good businesses, which are easy to understand. Investors should look for businesses they would feel comfortable with if the markets were to close for ten years. One needs to understand how a business works and where the company’s earnings power is headed over the long-term. Good businesses generate their earnings in cash; have strong balance sheets, and few competitors. When analyzing a strong balance sheet, make sure to watch for liabilities not on the balance sheet as well.
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