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Lessons from the 2021 Berkshire Letter

March 2, 2022

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Jon

The Berkshire Hathaway annual letter was released this past weekend. It was one of Warren Buffett’s shortest letters to date.

But it wasn’t without a few lessons. As usual, Buffett scattered several lessons and reminders for investors throughout. The lessons were just briefer than normal. Let’s dive in.

Buy Businesses, Not Pieces of Paper

Whatever our form of ownership, our goal is to have meaningful investments in businesses with both durable economic advantages and a first-class CEO. Please note particularly that we own stocks based upon our expectations about their long-term business performance and not because we view them as vehicles for timely market moves. That point is crucial: Charlie and I are not stock-pickers; we are business-pickers.

Buffett makes two important points. He’s not trying to profit off of short-term swings in the market. He knows market timing is a fool’s errand. Continue Reading…
The Consequences of Being Wrong

February 25, 2022

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Jon

Every investment brings with it a range of potential outcomes. That range is wider or narrower depending on the investment. Somewhere in that range sits a most likely outcome. And knowing the most likely outcome helps with making investment decisions.

Of course, the most likely outcome isn’t guaranteed to happen. For example, if the most likely outcome has a 70% chance of success, it means there’s a 30% chance something else happens. So what if that something else happens?

As Peter Bernstein makes clear, in an old interview with Jason Zweig, knowing the consequences is the most important part of understanding risk: Continue Reading…
Walter Schloss: Making Money in the Stock Market

February 23, 2022

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Jon

Walter Schloss started as a runner on Wall Street in 1934. By 1940, he had taken a couple of courses taught by Ben Graham. Which led to him working under the master at Graham-Newman. Then Schloss started his own partnership in 1956 after Graham-Newman shut down.

Warren Buffett described Walter’s investing style this way:

Walter has diversified enormously, owning well over 100 stocks currently. He knows how to identify securities that sell at considerably less than their value to a private owner. And that’s all he does. He doesn’t worry about whether it’s January, he doesn’t worry about whether it’s Monday, he doesn’t worry about whether it’s an election year. He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over and over again. He owns many more stocks than I do — and is far less interested in the underlying nature of the business; I don’t seem to have very much influence on Walter. That’s one of his strengths; no one has much influence on him.

Schloss’s genius was that he knew himself well to build a strategy that fit himself perfectly. He knew what he understood (avoided what he didn’t understand), his risk tolerance, and his personality. And he kept it simple.
Continue Reading…
Lessons from Charlie Munger at the 2022 DJCO Meeting

February 18, 2022

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Jon

Charlie Munger answered questions at the Daily Journal annual meeting this week. There’s always something to learn from the 98-year-old investor.

Though, one of the few downsides of these meetings is the repetitiveness from year to year. Thankfully, the questions were moderated. That helped mix things up a bit. Which led to better answers.

While the entire Q&A session is worth watching (linked below), I highlighted a few of those lessons below. Continue Reading…
How to Become a CFP®

February 16, 2022

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Jon

In October 2019, I started the CFP^® certification process and finished last month. I wanted to walk through my experience in case it’s useful for others.

CFP^® certification is a four-step process. It involves the “4 E’s”: education, exam, experience, and ethics. The bulk of this post will cover the first two. For more in-depth info, I recommend the CFP Board site.

Education

The education requirement includes a bachelor’s degree and completing the certification coursework. The coursework is seven courses in total: financial planning, insurance planning, income tax, retirement needs, investments, estate planning, and a comprehensive case analysis. With the right credentials, you can bypass the first six and only take the last course. I wasn’t so lucky.

The CFP Board makes it easy to search for colleges that offer the courses. I originally went with an in-person classroom format. The main reason is that I’ve been out of “school mode” for quite a while and thought it would be a better learning environment. I took the introductory course through Northwestern University. Continue Reading…
The “One Up on Wall Street” Rules

February 11, 2022

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Jon

Peter Lynch’s classic One Up on Wall Street was published in 1989. I bet it left a mark on anyone bit by the investing bug in the 1990s.

The downside of classics like Lynch’s books is how easy it is for new impressionable investors to overlook what’s important when you don’t know what’s important. When I first read it, I’m fairly sure the only lesson I walked away with was “find multi-baggers.” Easy enough. (It wasn’t!)

It’s almost like you have to read the classics three or four times before all the lessons sink in. And maybe add a few years of investing in the markets for good measure too.

I recently dug up my old copy. There was no marginalia (not a good sign) — only some folded page corners. Turns out, I missed a lot but the important lessons were there.

In fact, Lynch ends each of the three sections with this: “If you take away anything from this section…I hope you’ll remember the following.” Then he rattled up off a list.

A selection of his summations are below: Continue Reading…

Lessons from the 2021 Berkshire Letter

The Consequences of Being Wrong

Walter Schloss: Making Money in the Stock Market

Lessons from Charlie Munger at the 2022 DJCO Meeting

How to Become a CFP®

Education

The “One Up on Wall Street” Rules