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talabib · 1 year

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Mastering the Art of Investing: Practical Strategies for Insightful Decision-Making

Key Point:

Making smart and insightful investment decisions is an attainable goal with the right strategies in place. By recognizing your limitations, managing emotions, seeking professional guidance, and aligning your investments with personal objectives, you can cultivate a robust and successful investment portfolio that stands the test of time.

Sound investment decisions are the bedrock of financial success. However, navigating the complex world of investing can be challenging, even for the most seasoned investors. This post explores practical strategies for making smart and insightful investment decisions, empowering you to grow your wealth with confidence and finesse.

Recognize the Limits of your Abilities

In both life and investing, it is crucial to acknowledge the boundaries of our expertise. Overestimating our abilities can lead to ill-advised decisions and, ultimately, financial losses. By cultivating humility and seeking external guidance when necessary, we can minimize risks and make more informed investment choices.

Manage Emotional Influence on Decision-Making

Emotions can significantly impact our ability to make rational decisions. To circumvent the sway of emotions, adopt a disciplined approach to investing, relying on data-driven analysis and long-term strategies rather than succumbing to impulsive reactions.

Leverage the Expertise of an Advisor

Engaging a professional financial advisor is a prudent investment decision. Their wealth of knowledge and experience can help you navigate market complexities and identify opportunities tailored to your financial goals, risk tolerance, and investment horizon.

Maintain Composure Amidst Market Volatility

Periods of market turbulence can incite panic among investors. However, it is essential to remain level-headed and maintain a long-term perspective during such times. Avoid making impulsive decisions based on short-term fluctuations and focus on your overarching financial objectives.

Assess Company Management Actions Over Rhetoric

When evaluating potential investments, examine the actions of a company's management rather than relying solely on their statements. This approach ensures a more accurate understanding of the organization's performance, financial health, and growth prospects.

Prioritize Value Over Glamour in Investment Selection

The most expensive investment options are not always the wisest choices. Focus on identifying value rather than being swayed by glamorous or high-priced options. This strategy promotes long-term financial growth and mitigates the risk of overpaying for underperforming assets.

Exercise Caution with Novel and Exotic Investments

While unique and exotic investment opportunities may appear enticing, approach them with caution. Ensure thorough research and due diligence before committing to such investments, as they may carry higher risks and potential pitfalls.

Align Investments with Personal Goals

Invest according to your individual objectives rather than adhering to generic rules or mimicking the choices of others. Personalized investment strategies are more likely to yield favorable results, as they account for your unique financial circumstances, risk appetite, and long-term aspirations.

Action plan: Learn a few simple rules and ignore the rest of the advice you receive.

It’s easy to become completely overwhelmed by the volume of advice available about investing. However, you don’t need to become an expert on the stock market in order to become a good investor.

Just like an amateur poker player can go far if he simply learns to fold his worst hands and bet on his best ones, a novice investor can become very competent just by following a few simple rules. For example, he should learn not to overreact to dips in the market and make sure to purchase value stocks instead of glamour stocks.

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dipnots · 1 year

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Steps to Building Wealth: A Guide to Achieving Financial Freedom

Becoming wealthy is a dream shared by many, but achieving it is not always easy. Building wealth takes time, patience, and a solid financial plan. Here are a few steps you can take to increase your chances of becoming wealthy: Create a budget: The first step to building wealth is understanding your income and expenses. Create a budget that allows you to save and invest a significant portion of…

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themillionairethinking · 4 months

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Living Below Your Means: A Millionaire's Financial Secret

Unlock the financial secrets of millionaires! 💰 Learn how to live below your means and adopt millionaire habits. Read the full blog - Link-in-bio #FinancialSuccess #MillionaireMindset #SmartGoals #MillionaireThinking #Wealthy #Save #LiveBelowYourMeans

Have you ever wondered how some people manage to become millionaires without having a high-paying job, winning the lottery, inheriting a fortune, or starting a successful business? How do they accumulate wealth and achieve financial freedom while others struggle to make ends meet? The answer is simple: they live below their means. Living below your means is a financial strategy that involves…

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#Embracing failure #Financial Freedom #Financial success #Gratitude mindset #Growth Mindset #Income tracking #Investment Strategies #Lifelong learning #Millionaire #Millionaire Habits #Money Management #Networking #Positive thinking #Self-improvement #SMART goals #Success #Wealth building #Wealth creation #Wealth Mindset

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dollar-and-sense · 1 year

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Building a Solid Financial Foundation: Budgeting, Saving, and Emergency Funds

The importance of budgeting for financial stability Creating and sticking to a personal budget is essential for achieving financial stability. A budget helps individuals track their income and expenses, identify areas for saving and cutting costs, and ultimately achieve their financial goals [1]. By creating a budget, individuals can gain a better understanding of their financial situation and…

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#Budgeting #Debt Reduction #Emergency Funds #Financial Education #Financial Goals #Financial Independence #Financial Literacy #Financial Planning #Financial Stability #Frugal Living #Investment Strategies #Money Management #Money Mindset #Personal Finance #Retirement Planning #Saving Money #Smart Spending #Wealth Building #Wealth Management

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worksmarter4yourfuture · 1 year

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Silver and Gold Wealth Strategy Presentation

Insight into why silver and gold should be considered a part of your strategy for saving for your future. Options on how you can start today and handle everything yourself. Learn more about how you can.

#youtube #silver and gold wealth strategy #silver and gold #silver #gold #galena illinois #how to save in silver #how to save in gold #silver and gold solutions #creating peace of mind for your future #creating peace of mind for your family #worksmarter4u wealth building

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dgtcreative2024 · 13 days

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Tycoon Achievements: The Demonstrated Way to Riches

Do you suppose turning into a tycoon requires a huge venture or possessing a major business? Reconsider truly, arriving at those million dooll achievements is tied in with pursuing shrewd monetary decisions, and it's demonstrated that you can undoubtedly begin the way to abundance with just $5 every day. Envision each and every day you figure out how to save just $5. It very well may be the change from your morning, espresso or the couple of dollars you could spend on a speedy nibble throughout a break currently imagine.

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randyorton66 · 24 days

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Warren Buffett- You Only Need To Know These 7 Rules!

Are you looking for the key to success? Look no further than Warren Buffett the world’s most successful investor. In this video, we will explore the 7 rules of Warren Buffett’s that you need to know. Let's watch the entire video and learn about these rules in detail.

👉 Subscribe to my channel to stay tuned: https://bit.ly/4aXYMxD

From understanding the price versus intrinsic value to holding on for the long haul, Buffett's wisdom spans fundamental principles that have stood the test of time in the ever-changing landscape of finance and business. Learn how to seize great opportunities, stick to what you know, invest based on facts rather than emotions, and prioritize the integrity and talent of managers.

Join us on this journey through Buffett's philosophy and discover how his principles can guide you toward a more secure and fulfilling financial future. If you're ready to take control of your financial destiny and unlock the secrets of success, this video is very helpful for you.

Have thoughts, questions, or your own Buffett-inspired success stories? Drop a comment below and let's continue the conversation. Remember, smart financial decisions today lead to a more secure and fulfilling tomorrow.

#warren buffett #warren buffett advice #warren buffett motivation #warren buffett 7 rules of investing #warren buffett investment strategy #warren buffett 7 rules that you need to know #wealth building #financial education #warren buffett interview #how to invest like warren buffett #warren buffett rules of investing #money mindset #warren buffett how to invest for beginners #buffett #you only need to know these 7 rules #Youtube

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talabib · 10 months

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How to Work Less to Achieve More

Key Point:

keep your attention on an important task by adopting hyperfocus. When you hyperfocus, you rid your environment of distractions, and become aware of what’s occupying your mind. What’s more, every time your attention strays, redirect it. Remember is that scatterfocus can help you with tricky problems that require creative solutions. With scatterfocus, you allow the mind to wander and make unusual connections. You can help create scatterfocus by nourishing your mind and allowing time to reflect.

In our fast-paced world, working long hours has become the norm. However, the key to achieving more is not simply working harder or longer—it's about working smarter. In this article, we will explore strategies to help you work less while accomplishing more. By training yourself to enjoy hyperfocus, cultivating meta-awareness and intentional focus, eliminating distractions, harnessing the power of scatterfocus for creative thinking, connecting seemingly unrelated information, and nourishing your mind, you can optimize your productivity and achieve greater success.

Train yourself to enjoy hyperfocus more.

Hyperfocus is a state of intense concentration where you become fully immersed in a task or activity. To work less and achieve more, it's important to train yourself to enjoy and leverage hyperfocus. Set clear goals, break tasks into manageable chunks, and eliminate distractions. Engage in activities that naturally captivate your attention and give you a sense of fulfillment. By training yourself to enjoy hyperfocus, you can maximize productivity and accomplish more in less time.

Meta-awareness and intentional focus are key to managing your attention.

Meta-awareness refers to being aware of your own thoughts and mental processes. Intentional focus involves directing your attention consciously and purposefully. Cultivating these skills is essential for effective attention management. Develop the ability to notice when your mind starts to wander and gently bring your focus back to the task at hand. By practicing meta-awareness and intentional focus, you can reduce time wasted on distractions and stay on track to achieve your goals.

Achieve hyperfocus by ridding your environment of distractions.

Distractions can significantly impact productivity and hinder your ability to work efficiently. Create a conducive work environment by minimizing distractions. Turn off notifications on your phone, close unnecessary browser tabs, and create a physical workspace that promotes focus. Consider using productivity tools or apps that block or limit access to distracting websites or applications. By eliminating external distractions, you can enter a state of hyperfocus and accomplish more in less time.

Scatterfocus helps you plan and think creatively.

Scatterfocus is the practice of intentionally allowing your mind to wander and explore different ideas, without a specific goal or objective. This mental state can be beneficial for planning and creative thinking. Set aside dedicated time for scatterfocus, allowing your mind to freely explore different thoughts and possibilities. Embrace daydreaming, engage in activities that stimulate your imagination, and give yourself permission to think outside the box. By incorporating scatterfocus into your work routine, you can generate fresh ideas and enhance your problem-solving skills.

Use scatterfocus to connect the dots between seemingly unrelated bits of information.

One of the unique benefits of scatterfocus is its ability to facilitate connections between seemingly unrelated information. During moments of scatterfocus, your mind can make unexpected connections and insights. Capture these ideas by carrying a notebook or using a note-taking app to jot down your thoughts. When you revisit these notes later, you may discover valuable connections and insights that can fuel your productivity and lead to innovative solutions.

Nourish your mind to make the most of scatterfocus.

To optimize scatterfocus and enhance your overall productivity, it's important to nourish your mind. Engage in activities that promote mental well-being, such as regular exercise, quality sleep, and mindfulness practices. Take breaks throughout the day to recharge and refresh your mind. Additionally, fuel your brain with nutritious foods that support cognitive function, such as fruits, vegetables, whole grains, and omega-3 fatty acids. By prioritizing self-care and nourishing your mind, you can maximize the benefits of scatterfocus and achieve more with less effort.

Working less while achieving more is within your reach. By training yourself to enjoy hyperfocus, cultivating meta-awareness and intentional focus, eliminating distractions, harnessing the power of scatterfocus for creative thinking, connecting seemingly unrelated information, and nourishing your mind, you can optimize your productivity and achieve greater success. Remember, it's not about working longer hours, but about working smarter. Embrace these strategies, experiment with different techniques, and find the balance that works best for you. As you implement these practices, you'll discover the power of effective attention management and witness your productivity soar.

Action Plan: Have a cup of coffee to help you hyperfocus.

Caffeine and hyperfocus are a match made in heaven. Caffeine keeps you alert and focused. It helps you persevere when work gets boring. And perhaps most importantly, it can improve your performance on a number of cognitive tasks. So the next time you need a burst of intense concentration, make sure you’ve got a cup of coffee to hand – if nothing else, it tastes wonderful.

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you10tubesworld · 26 days

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In this empowering episode of the Rent to Retirement Podcast, hosts Adam Schroeder and Zach Lemaster sit down with real estate investor Lindsay Lovell, founder of G6 Capital and Wanderlust Estates. Discover how Lindsay transitioned from a high-paying W-2 job to building a formidable portfolio of single-family homes and short-term rentals. Learn the strategies she used to ramp up her investments, the importance of building a reliable team, and how she navigates the challenges of investing in different markets. Whether you're a seasoned investor or just starting out, Lindsay's insights and practical tips will inspire you to take your real estate journey to the next level. Key Moments: 00:00:07 - Introduction of Lindsay Lovell 00:00:43 - Lindsay's start in real estate investing 00:03:09 - The strategy behind her first investment property 00:04:03 - Importance of having a reliable team for long-distance investing 00:06:00 - Lindsay's approach to the BRRRR strategy and lessons learned 00:09:24 - Building a real estate business and the role of a rockstar real estate agent 00:14:06 - Challenges and lessons from flipping properties 00:18:09 - The pros and cons of working with wholesalers 00:21:09 - Lindsay's experience with different financing options 00:26:14 - Leveraging a self-directed IRA for real estate investing 00:29:36 - Introduction of the Millionaires March and G6 Capital 00:32:25 - Insights into the current short-term rental market

#Real Estate Investing #Financial Freedom #Entrepreneurship #BRRRR Strategy #Short-Term Rentals #Wealth Building #Investment Strategies #Real Estate Financing #Youtube

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mortallynervousfart · 27 days

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Project Serenity - 33% Life-time Commissions Digital - membership area

#Finding Financial Peace with Project Serenity: A Membership Worth Exploring #Financial planning can be a daunting task #especially in today's ever-changing economic landscape. For years #I felt overwhelmed by investment options and unsure of how to navigate the complexities of the financial world. This is where Project Sere #A Curated Approach to Financial Education #Project Serenity is a digital membership area designed to empower individuals to take control of their financial futures. The platform pro #including insightful articles #informative webinars #and interactive workshops. These resources cover a wide range of topics #from investment fundamentals and portfolio diversification to wealth-building strategies and navigating the ever-evolving world of finance.#Expert Guidance for Informed Decisions #What truly sets Project Serenity apart is its focus on expert guidance. The platform offers insights from seasoned financial professionals #wealth managers #and experienced investors. Their knowledge and experience provide members with a valuable framework to make informed financial decisions #A Supportive Community for Shared Growth #Project Serenity fosters a supportive and collaborative environment. Members can connect with each other through online forums and discuss #ask questions #and learn from one another's financial journeys. The sense of community is valuable #especially for those who might feel lost in the world of finance.#Building a Brighter Financial Future #Since joining Project Serenity #I've gained a newfound confidence in managing my finances. The platform's educational resources have equipped me with the knowledge and too #Important Disclaimer: This review is for informational purposes only and should not be considered financial advice. It's crucial to condu #Overall #Project Serenity offers a valuable resource for anyone seeking to improve their financial literacy and build a secure financial future. I #expert guidance #and a supportive community make it an excellent choice for individuals at any stage of their financial journey.

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dgtcreative2024 · 19 days

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The most effective method to Get Wealthy in A half year Utilizing the Pattern of good following good - Bounce Delegate

Assuming you look carefully contingent upon the conditions, life can be quicker than ordinary. By and large, individuals are satisfying 75 years of age, however that is very little time. Looking at this logically, we will have 75 summers, 75, winters, 75, springs and 75 harvest times. A little mix-up you make in your life could remove two seasons or much more, and that is extremely stressing.

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akreview · 1 month

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#Wealth Brain Code Review #Wealth Secrets #Financial Freedom #Abundance #Riches #Prosperity #Wealth Building #Money Mindset #Success Tips #Unlock Wealth #Wealth Strategies #Wealth Mastery

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randyorton66 · 24 days

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Unlocking Wealth: Warren Buffet Speech Will Change Your Financial Future

Discover the secrets to financial success with Warren Buffett's timeless wisdom! In this video, we break down Buffett's insightful speech that can revolutionize the way you think about wealth, success, and personal growth. Let's watch the entire video and learn more about how Warren Buffet's speech will change your financial future.

👉 Subscribe to my channel to stay tuned: https://bit.ly/4aXYMxD

In today's video, we learn a thought-provoking speech by the legendary Warren Buffet, a beacon of financial acumen. Prepare to be inspired and empowered as we uncover the key principles that can reshape your financial future.

We can also learn how to maximize your earning potential, make smart financial decisions, and cultivate admirable qualities for long-term success. Gain invaluable insights on avoiding credit card debt, choosing a fulfilling career, and prioritizing personal integrity.

Warren Buffett's transformative speech, where he unveils the key principles that can reshape your financial destiny. From understanding the true value of your future earnings to prioritizing personal development and integrity, Buffett's advice offers a roadmap to sustainable wealth and success.

Whether you're a seasoned investor or just starting your financial journey, this video is for you and strategies that can help you build a solid foundation for financial stability and prosperity.

If you're ready to take charge of your financial future and unleash your full potential, don't miss out on this empowering discussion. Like, subscribe, and hit the notification bell to stay updated on our latest content. Let's embark on this journey to financial freedom together.

#warren buffet speech #warren buffett #en buffettwarren buffett investment strategy #warren buffett investment #wealth building #warren buffet speech will change your financial future #you can become rich #warren buffett financial advice #warren buffett's transformative financial wisdom #financial education #money management #warren buffett motivational speech #Youtube

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talabib · 1 year

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Master the Market: Proven Strategies to Beat the Stock Market and Build Wealth

Key Point:

Thanks to the internet, you don’t need to be an expert to invest your money smartly; all the necessary tools and stock data are online. By using these tools, some specific calculations and knowing how to spot a successful, profitable company, you will be in a prime position to make the right investment choices and steadily build your wealth.

For most of us, the stock market is basically a no-fly zone: it’s too complicated, and too dangerous. Let the experts handle it, we say.

But that’s a shame, because there is a way that anyone can make money in stocks. This post teaches you the key indicators for that right, wonderful business that could change your life.

Contrary to popular myths, you don’t have to be an expert to be a great investor, and it is possible to beat the market.

It’s common knowledge that you'd be remiss to invest without consulting a financial expert, right? Well, the notion that managing money demands both time and expertise isn’t exactly accurate.

You don't actually need to have depth of knowledge and all the tricks of a professional financial adviser. You just need a few good tactics.

Fortunately, today the internet has the tools and knowledge you need, at minimal costs. Information and tools such as stocks’ histories and statistic calculators can make a lot of the work easier for you. For instance, websites such as MSN Money, Yahoo! Finance and CNN Money have data on thousands of stocks and investment calculators.

Thanks to technology, these tools are actually far more accurate than anything experts had ten years ago. Aside from these tools, you also need to know that you really can beat the market. To do so, you must sell stocks for far more or buy for far less than their real market value.

Yet, according to the prominent Efficient Market Theory (EMT) you can’t do this, as everything that can be known about a company is already figured into the price. Thus, stock prices can’t be too high or low. But this is wrong.

Many of us recall the bubble in the nineties, where, contrary to EMT assumptions, prices were far above their real market worth for some years, only to plummet dramatically afterwards. Additionally, Warren Buffett showed that at least 20 investors were able to beat the market for over 20 years.

So cast aside the myths of expert help and an unbeatable market because, thanks to the internet and the strategies in this post you can make great investments yourself.

The popular strategy "diversify and hold" is not nearly as safe as it's cracked up to be.

You've heard the formula, “diversify and hold” a million times; it's supposedly the safest way to invest in the stock market. But it’s also problematic.

First, it would’ve failed for approximately more than half of the last century. Let's examine how a long-term, diversified portfolio would have performed between 1905 and 2005: it would’ve had a zero rate of return between 1905 and 1942, 1965 and 1983 and from 2000 to 2005. That's 60 out of 100 years!

What you should do instead of ‘diversify and hold’ is improve your security by keeping track of all your stocks — which you might not do if your portfolio is diversified, as it would take a lot of time and effort to monitor how all your stocks are doing. Also, it's unlikely that you would thoroughly comprehend the dynamics of all the businesses you're investing in. This would result in you not being able to react as quickly to save your portfolio from losses, as you would if you only invested in fields you understood.

Say you’re a pharmacist, and you receive a Red-Hand letter warning you about a drug’s serious, unexpected side-effects. You’ll know this letter will result in considerable losses for a pharmaceutical company and therefore sell your shares immediately. Whereas if you were clueless about pharmaceutical companies, you wouldn’t know about the pending losses until it’s too late.

The truth is, if you diversify, whatever happens to the market will happen to you. You should know that whenever a large amount of money is withdrawn from the market, mutual funds decline in value, investors withdraw even more money and values drop even faster. This could happen when all the baby boomers take out the money they invested for their retirement.

Only invest in a business you understand and you’d like to own.

If you were to buy a business, rather than stocks, would your criteria for doing so be any different? Shrewd investors only invest in a company they’d like to own in the long term, so thinking about buying stocks as if you were to buy the company will guide you towards investing carefully.

When you consider buying stocks, you probably think it’s easy to get out quickly if the company is doing poorly. You could therefore be tempted to opt for a risky business, pay too much attention to one promising growth-rate in an average business, or even lose money in a market bubble.

If you were to buy the whole company, however, you’d be far more cautious. You’d carefully weigh its performance, history and management against other companies and, in doing so, make far better decisions.

To make even better decisions on investments, it’s also wise to invest in a sector within your field of interest, as you’ll already be knowledgeable about it.

If you work in IT, for example, you’re in a far better position to invest there than someone who doesn’t. You’ll know about the different providers, their strategies, the quality of their products and so forth.

Also remember that investing in a business means you’re essentially voting for it to continue with its work.

Say you’re researching some highly profitable stocks to fund your child’s education. Would you purchase those stocks if the company is making a chunk of its profits by exploiting children in Bangladesh? As a smart investor, probably not.

Know that your investment will have an impact, and you’re making a statement of where you choose to invest.

There are good criteria for a company's ability to stand its ground.

Like moats around a castle, certain assets protect a company against competition and inflation. When investing, it’s a good bet to choose companies with one or more of these “moats.”

So what exactly do moats do? A moat enables a company to dominate a market, increase its prices to keep up with inflation and produce enough profit to expand.

There are many different kinds of moats. Some moats may be intangible competitive advantages, like a patent or a trade secret that makes direct competition really tough, or even illegal. For instance, Pfizer had a patent for its hugely successful Viagra, therefore other companies weren’t permitted to copy the product. As a result, Pfizer faced no real competition for sexual enhancers.

Another kind of moat could be a strong brand that customers identify with or are extremely loyal to. Coca Cola, for example is an incredibly stable and powerful brand and its customers will often choose its soft drinks over others.

A moat can also mean having products that are cheaper or easier to buy. For instance, Walmart is so immense that it’s in a powerful position to bargain with its suppliers. In doing so, it can sell goods at very competitive prices.

Another moat could be when the product itself isn’t really affordable, but switching to another is a real hassle. Take Windows, for example. Many people use it even though they hate Microsoft. But it’s easier to stick with it because so much software is exclusive to Windows and if they changed to another operating system, they’d have to change all their software, too.

Lastly, some companies’ moats entail exclusive governance over a market due to a legal privilege. For example, the utility PG&E has a legal monopoly to provide power in its area.

Steady businesses have competitive advantages.

We’ve now seen what moats are and how they can help businesses become extremely successful. But how can you know if a company has one? Well, you can be sure that a company has a moat if they score well on five specific indicators for a minimum of ten years.

The best indicator of a wide moat is return on investment capital (ROIC) over at least a ten year period. ROIC is the rate of return a company makes from the money it invests in itself in a year. For example, say you invested $20 in stamps and then later sold them for $30. Your profit would be $10. The ROIC is the profit divided by the total you invested, which in this case would be 50 percent.

Be aware that a company that generates high returns could draw so many competitors that a good position in the same market becomes difficult to secure and therefore none are able to make decent returns. Unless, however, the company has a wide moat.

Therefore, if a company can hold onto a ROIC of at least 10 percent for ten years, it’s likely beaten out its competitors, which now means it has an advantage.

Another good way to gauge a wide moat is by the growth of a company’s equity. Equity is the amount of money that would remain if a company sold all of its assets and cleared all of its debts.

If a company’s equity increases by 10 or more percent for at least ten years, it’s an indicator that it has enough money to invest into its expansion, which also puts the company in a solid, competitive position.

Some competitive advantages are easy to spot.

Let’s turn to three other ways to tell if a company has a moat, all of which are straightforward calculations.

The first calculation is figuring out if they’ve had at least a 10 percent increase in earnings per share (EPS) for approximately ten years.

Say three friends start a restaurant. Their EPS would be the restaurant’s net income divided by three. So if the store makes $60,000 net income, the EPS would be $20,000.

Then let’s say in 10 years, the EPS rises from $20,000 to $160,000. To calculate the restaurant’s EPS growth rate, first calculate how many times 20 needs to double in order to reach 160. So, 20 doubles to 40, then to 80 then to 160. So it doubles three times over the ten years, averaging around three years to double each time.

Now apply the Rule of 72. Divide 72 by the average number of years over which the figure doubles once. The restaurant’s ten-year-EPS growth rate would be 72 divided by three, which equals 24. Twenty-four percent would be the restaurant’s moat, and thus its competitive advantage.

You can also calculate when a sales growth rate consistently increases over ten percent. For example, Garmin’s sales rose from $100 million to approximately $800 million from 1995 to 2004, meaning it doubled three times over nine years, or once every three years. If we apply the rule of 72, we see that 72 divided by three equals a 24 percent sales growth rate. Clearly, Garmin had a wide moat.

The last calculation is the free cash flow growth rate. If this is consistently over 10 percent, this means profits turn into cash.

Free cash flow is operations cash minus capital expenditure, or the money that can be invested into expanding the company.

Garmin’s free cash flow grew from $40 million to $130 million in seven years, meaning it doubled just less than twice in seven years, or once every three and a half to four years. If you divide 72 by four, which equals an 18 percent sales rate, we see that Garmin was highly profitable.

For a smart investor, a company is only promising if the CEO is driven and owner-oriented.

When you’re considering which company to invest in, you can always refer to those Big Five criteria in the charts. But there’s something else that’s worth noting; how effective is the CEO you want to entrust your money to?

You need to opt for an owner-oriented CEO. They’ll make smart long-term decisions and inform the shareholders on what they need to know.

As a shareholder, you’ll need to know if there are any problems or you won’t be able to respond appropriately.

A good owner-orientated CEO will announce if it’s been a very bad year, and try to give a reasonable explanation. Likewise, an owner-oriented CEO will refrain from actions that temporarily increase the stock price but do harm to the company in the long term.

Picture an executive who owns a lot of shares trying to make the stock price rise so he can cash out. That executive doesn’t care about the business down the line, or about your shares.

You should also look for a CEO who is driven, as he’ll put in a lot of effort to ensure the company remains profitable. CEOs like this aim for big goals and they’ll remind their employees of those goals. A company with such a manager is well set to generate more and more company value, which is ideal for your investment.

For instance, when Darwin Smith bought out Kimberly-Clark, it was a mediocre company. But he pictured it as the best paper-products business in the world. He worked for 20 years toward this lofty goal, transforming and expanding the company. Twenty-five years after Smith took over, Kimberly-Clark was the world's number-one paper-based consumer-products company and had brands like Kleenex under its wing.

Knowing if a CEO is driven and honest equips you to make a sound estimate of a company's value.

Demand a big margin of safety.

Remember when we said that the Effective Market Theory is wrong? Here’s why: contrary to the theory, price and value aren’t the same thing, and the key is to buy when the difference gives you an advantage. A stock’s price is what you pay, whereas its value is based on the money a business generates over time.

Stock value can be a little tricky to gauge, as it’s based on a business’s future EPS and price/earnings ratio. However, there are tools and places to assess value online, such as Sticker Price Calculators.

Markets are inaccurate in the short term. For instance, at the close of the nineties, prices for gold, silver and copper dropped dramatically. Yet, the real value of metals wasn’t diminished; we’d need them eventually, so some savvy investors bought shares cheaply. Then, in the early 2000s, demand rose again, which increased share prices and those smart investors made a fortune.

What you should do is demand a large margin of safety. A margin of safety (MOS) is the value, minus the price.

A good margin of safety should be half the value of an investment. For example, in 2000, Dell’s value was estimated at $40/share, and so was its market price. That’s a fair price with no margin of safety.

As a smart investor, its price would need to be no higher than 50 percent of its real value, or $20, before you decide to buy.

Only a year later, Dell’s price fell to $20/share, while the stock’s value increased, so its MOS reached 50 percent. That would have been the right time to buy.

The MOS rule will provide you with great returns, and if there’s a bubble, it will prevent you from losing all your money.

A good MOS is not to be overlooked; in 2000, every NASDAQ stock that crashed had a stock price which was higher than its value.

Action plan: Be smart about checking the stock market.

Don’t work up a nervous sweat checking the market numerous times a day. The best time to check the market is when it’s closed, and, even better, at the same time each night. Doing so will give you the most consistent data.

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