Exploring eternal truths in investing and business. Reflections on advancements in technology, poverty reduction, and conscious capitalism. Emphasizing the importance of optionality in business and investing with examples from Alphabet. Evaluating companies on values and sticking with great ones. Rulebreaker investing and defying conventional wisdom, with six traits to look for when picking stocks.
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Quick takeaways
The best businesses have optionality and can adapt to changing circumstances, exemplified by companies like Alphabet.
The stock market experiences periods of growth and decline, but the long-term trend is generally upward.
Conscious capitalism prioritizes purpose and win-win outcomes for all stakeholders, aligning our investments with socially responsible companies is crucial.
Rule Breaker investors challenge conventional wisdom and embrace contrary thinking to find innovative companies and investment opportunities.
Investing is a long-term endeavor focused on holding well-selected companies for compounding growth and significant returns.
Deep dives
The Protopia of Progress
In the world of money and investing, we are living in a protopia, a world that quietly improves every day. Small, incremental advancements in various aspects of life are shaping a better future. From technological advancements to poverty reduction, there are countless examples of progress, though not always evident in the present. It is important to recognize the collective efforts of individuals, businesses, and conscious capitalists who contribute to these improvements.
Embracing Optionality and Evolution
The best businesses have the ability to evolve and adapt to changing external circumstances. They possess optionality, meaning they have multiple potential futures. Companies like Alphabet exemplify this by operating in different industries and technologies, constantly transforming and staying relevant. While not every company will have the same resilience, all businesses should aspire to have optionality, enabling them to morph into something better and more successful.
The Stock Market's Ups and Downs
The stock market experiences periods of both growth and decline. It is normal for the market to drop significantly around one year out of every three. However, on the flip side, the market tends to go up around two years out of every three. While it is impossible to accurately predict market movements in the short term, the historical trend suggests that the market generally moves upward over the long term.
Conscious Capitalism and Long-Term Investing
Conscious capitalism is a philosophy that prioritizes purpose and creating win-win outcomes for all stakeholders, including customers, employees, partners, and shareholders. It is driven by visionary leadership and fosters a great corporate culture. As long-term investors, it is crucial to align our investments with conscious capitalist companies that contribute to the betterment of society. By holding on to these investments through ups and downs, we can participate in their long-term success.
Embracing Foolishness and Contrarian Thinking
As Rule Breaker investors, we challenge conventional wisdom and embrace contrary thinking. This mindset allows us to find innovative companies and investment opportunities that others may overlook. By breaking the rules and thinking differently, we increase our chances of achieving outstanding investment results.
Embracing Losses and Celebrating Wins
Rule Breaker investing comes with its fair share of losses. It is important to accept and expect losses as part of the investing journey. However, the joy and gains from successful investments far outweigh the pain of losses. A single big winner can erase all the losses and generate substantial profits. To be a successful Rule Breaker investor, one must embrace the willingness to experience losses and celebrate the wins.
The Spiffy Pop Phenomenon
A Spiffy Pop occurs when the value of a stock increases in a single day by an amount greater than the original cost basis of the investment. It represents a significant gain and highlights the success of a Rule Breaker investment. By focusing on long-term investing and holding stocks that have the potential for Spiffy Pops, investors can enjoy substantial returns that outweigh the losses and contribute to their financial success.
Investing for the Long Term
Investing, by its very nature, is a long-term endeavor. Short-term trading and market timing are not effective strategies for sustained success. Investing is about holding onto stocks for extended periods, allowing compounding and the growth of well-selected companies to drive significant returns. By understanding the definition and importance of long-term investing, investors can adopt the right mindset and approach for lasting financial success.
Embracing the Rule Breaker Investor Identity
As Rule Breaker investors, we embody a unique approach to business and investing. It is about breaking away from conventional wisdom, embracing risk, and seeking out innovative companies with disruptive potential. By staying true to our identity as Rule Breakers, we are more likely to achieve exceptional investment results and enjoy the journey of investing.
Ah, the eternal verities! Some things never change. But that doesn't mean we don't need to revisit them from time to time. Whether you've been with us from the beginning or have joined us in the last few years, it's important to review the things that we value most as Rule Breaker Investors.
