These Ground Rules of investing are timeless. Book#77

Seeing this book The Ground Rules by Jeremy Miller recommended by the Oracle himself in the 2015 Annual shareholder letter got me curious, so I got to it last year. What is it about?

“In the fourteen years between his time in New York with value-investing guru Benjamin Graham and his start as chairman of Berkshire Hathaway, Warren Buffett managed Buffett Partnership Limited, his first professional investing partnership. Over the course of that time, Buffett wrote semiannual letters to his small but growing group of partners, sharing his thoughts, approaches, and reflections.”

This books packs 12 years of Warren Buffett early life widsom.

Nothing new for the long-time followers of the value investing discipline but these criteria are timeless.

My own takeaways:

1. Underspend and save.
2. Remember that investing small amounts is a huge structural advantage since there, in the small cap space, lie the biggest inefficiencies.
3. Buy to own businesses, not trades, ignore short-term gyrations.
4. Be contrarian, buy only value, do not invest until it is logical, do not be swayed by the market or your emotions.
5. Do not try to time or forecast the market, he used to say: “I am not in the business of predicting or forecasting general stock market or business fluctuations. If you think I can do this, or think it is essential to an investment program, you should not be in the partnership.”
6. Eschew market fads, Buffett would say that it is best to have only 10 selections in a life, and this means that you will be more careful in picking them and will likely prevent serious risks of capital loss.
7. Be patient, investing requires a 3 to 5 years minimum time horizon.
8. Understand the power of compounding, Einstein himself called it the 8th wonder of the world.

What results did that yield? From 1955 to 1969 the majority of his net worth was invested in the partnership, he charged no management fee, only a performance fee of 25% above a 6% annual threshold. He annualized 24 percent return after fees for 14 years, achieving a net worth of about $100 million at the time, probably equivalent to $1Billion+ in today’s dollars. He closed the partnership in 1969 at the age of 39. The rest is history.

My purpose in life is independence, fulfilment and a better understanding of how the world works. Like Charlie Munger, I believe in the discipline of mastering the best that other people have ever figured out. And like Sir Isaac Newton, I believe in our ability to see further than any others before us by acknowledging that we are standing on the shoulders of giants. With this blog I hope to keep track of my learning about investing, business, decision making, entrepreneurship and self development while inspiring others to do the same. For the moment the format of this blog will be one post for each book that has influenced me, but I expect it to evolve over time. Join my Journey. John.