Good advice from one of the greats:

“We clear a high bar before making an investment, and we resist the many pressures that other investors surely feel to lower that bar. The prospective return must always be generous relative to the risk incurred. For riskier investments, the upside potential must be many multiples of any potential loss. We believe there is room for a few of these potential five and ten baggers in a diversified, low-risk portfolio. A bargain price is necessary but not sufficient for making an investment, because sometimes securities that seem superficially inexpensive really aren’t. “Value traps” are cheap for a reason–perhaps an inept and entrenched management, a poor history of capital allocation, or assets whose value is in inexorable decline. A catalyst for the realization of underlying value is something we seek, but we will also make investments without a catalyst when the price is sufficiently compelling. It is easy to find middling opportunities but rare to find exceptional ones. We conduct an expansive search for opportunity across industries, asset classes, and geographies, and when we find compelling bargains we drill deep to verify the validity of our assumptions. Only then do we buy. As for what we own, we continually assess and reassess to incorporate new fundamental information about an investment in the context of market price fluctuations. When bargains are lacking, we are comfortable holding cash. This approach has been rewarding–as one would hope with a philosophy that is painstaking, extremely disciplined, and highly opportunistic.”

Found via Value Investing World

Last night I had a dream that Charlie Munger was giving me putting lessons.  We were on a putting green – I remember trying a little too hard on my first putt and pulling it just to the left of the cup.  I felt embarrassed that I missed my putt in front of Charlie Munger.  I can’t remember Munger’s exact words but they were something about mechanics and focusing on a relaxed stroke – that putt went in and I woke up.

This is what you get for reading Berkshire Hathaway’s annual letter right before bed.

My interpretation: Investing and golf are remarkably similar.  Your main focus needs to be on process and mechanics.  Take whatever the market/course throws your way and stay disciplined – apply your process, think about your shots, do not take too many of them, focus on the things you can control (yourself), don’t be overcome by psychology.  You will make bad shots / investments – it’s part of the game, don’t let it ruin your round.  If you’re in a rut clear your mind – stay focused on applying your process to the next shot, the next opportunity.

I could go on but you get the idea.