Summary: The KISS Investing Strategy
The core philosophy is to keep investing simple and disciplined, focusing on buying quality at a discount and selling for specific, rational reasons.
Part 1: The "ABC" of Buying
This is your offensive strategy for building the portfolio.
A. Assess QMV: Always evaluate a stock using these three criteria before buying.
B. Buy Quality: Only invest in good quality companies.
C. Buy at a Discount: Never pay full price. Always insist on a Margin of Safety.
What is QMV? (The Buying Checklist)
Quality (Points 1-6): Is the business excellent? (e.g., strong brand, durable competitive advantage, good financial health).
Management (Point 7): Is the leadership competent and trustworthy?
Valuation (Point 8): Is the current stock price a bargain?
Part 2: The "1,2,3,4" of Selling
Selling is categorized into Defensive (urgent, to protect) and Offensive (planned, to optimize).
Defensive Selling (Urgent)
#1: Personal Emergency: You need the cash (though this should be avoided with a separate emergency fund).
#2: Broken Fundamentals: SELL URGENTLY if the company's core business is permanently impaired (e.g., fraud, loss of competitive advantage). This is to prevent serious loss and protect the portfolio.
Offensive Selling (At Leisure)
#3: Stock is Overpriced: The stock has risen so much that the potential reward is low and the risk is high. Sell to take profit and recycle capital.
#4: A Better Bargain Exists: You've found another high-quality stock at a much more attractive price. Sell to reinvest for a better potential return.
The Core Selling Principle (from Warren Buffett's method):
You sell to reallocate capital from a less attractive investment to a more attractive one, or when the original reason for buying (the quality) is no longer valid.
Key Takeaways
Buying: Be patient and selective. Use the QMV checklist.
Selling: Be disciplined. Don't sell just because a stock is up or down. Have a clear reason that fits the 1,2,3,4 framework.
Portfolio Management: Let your winners run unless they become overpriced (#3) or you find a better opportunity (#4). Cut your losers quickly when the fundamentals break (#2).
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