Five principles
that compound.
Value investing is not stock-picking. It is a small set of ideas, held patiently, that let a business — and your capital — work while you wait. Scroll slowly.
A great business defends itself while you sleep.
A moat is the structural reason a company keeps its profits when competitors want them: a brand people trust, a network that gets stronger with scale, a cost no rival can match, a switching cost customers won't pay to leave. What it protects, concretely, is high margins and a high return on invested capital — the fuel of compounding. The wider the moat, the longer those returns run undisturbed.
business
“In business, I look for economic castles protected by unbreachable moats.”Warren Buffett
A wonderful business can be ruined by the wrong hands.
Every dollar a company earns is a decision: reinvest it, buy back stock, pay it out, or acquire. Great managers are honest, own shares alongside you, and allocate capital where returns are highest. The test is simple — do they treat the business like owners, or like tenants?
“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”Warren Buffett
Price is what you pay. Value is what you get.
The single most important idea: never confuse a good company with a good investment. Estimate what a business is worth, then insist on paying meaningfully less. The gap between value and price is your protection against bad luck, bad judgment, and an uncertain future.
The hatched band is your estimate being 20% too optimistic. Even then, the price you paid still sits below value — that is what the margin is for.
“The three most important words in investing are margin of safety.”Benjamin Graham
The eighth wonder is time, not returns.
Money that earns returns, reinvested, earns returns on those returns. Early on it looks linear and dull. Then the curve bends — and almost all the wealth arrives at the end. The rate matters; the years matter more. The hardest part of compounding is simply not interrupting it.
“The first rule of compounding: never interrupt it unnecessarily.”Charlie Munger
The market is there to serve you, not to instruct you.
Every principle above fails if you cannot hold your nerve. Fear makes you sell at the bottom; greed and FOMO make you buy at the top. The advantage is not a higher IQ — it is a temperament that stays rational when the crowd cannot. Your process exists for exactly the moments your emotions argue against it.
Be fearful when others are greedy, and greedy when others are fearful. Written down it is obvious. Lived through, it is the hardest thing in investing.
Buy a business with a moat, run by owners, at a discount to its worth — then let time and temperament do the rest.
None of these principles is complicated. Holding all five at once, for years, while the market tempts you to abandon them — that is the entire game.