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Warren Buffett

The Compounder

You want one great business at a fair price and then you want to do nothing for a very long time. Most of your edge comes from refusing to act, and from understanding that the compounding is in the holding, not the trading.

Position on the six dimensions

Margin of SafetyOnly if cheap
Business QualityOnly the best
Time HorizonTen years plus
ConcentrationFew, heavy bets
Contrarian BentAgainst the crowd
Decision ModeGut feel

Where this method has an edge

Where it can hurt you

One rule from this method

If you would not be happy owning the whole company for ten years, do not buy ten shares of it.

A wonderful business at a fair price beats a fair business at a wonderful price. Then let time do the work.

Berkshire Hathaway shareholder letter, 1989 — "Mistakes of the First Twenty-five Years"

How close are you to this method?

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The other nine

Benjamin Graham
The Defensive Analyst
Charlie Munger
The Inverter
Peter Lynch
The Ground Scout
Jesse Livermore
The Tape Reader
George Soros
The Reflexive Trader
Li Lu
The Cross-Border Holder
Duan Yongping
The Business Owner
John Templeton
The Global Contrarian
Ray Dalio
The Systems Builder
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