Still, what almost always works

So far, we have seen that the markets can behave as though adrenaline is gushing through its veins. It can also behave like it has overdosed on cortisol (the stress hormone). Further, market participants often make many mistakes in this constant dance between excitement and fear. These could range from short-term fixation to believing that some trees can grow to the sky. Where does that leave us, then? If you let the market control you, everything will go haywire. You have to remember that it is there to serve you. And to be served right, you have to ingrain certain principles. These principles fall under the framework of value investing. What almost always works Combining the experience of successful investors and the mistakes of the failed ones, we have boiled down the principles of value investing to three things. 1. Look at a stock as an ownership in the business 2. Seek more value than you are paying for 3. The right stuff Mix all these ingredients, and you will get the secret elixir. But be forewarned. Ingraining these principles takes a lot of work. Most investors fail to do so. Both Charlie Munger and John Kenneth Galbraith share their view. "It's not supposed to be easy. Anyone who finds it easy is stupid." Charlie Munger "There is nothing reliable to be learned about making money. If there were, study would be intense, and everyone with a positive IQ would be rich." John Kenneth Galbraith Let's look at each of these principles in detail. Business-like investing A stock represents ownership in a business. When evaluating a company for a potential investment, analyse as though you are buying the entire company. That is, you will be thinking about being the company's owner: Who are my customers? Who are my suppliers? What kind of demand is there for my product? How do I fare against the competition? And so on. To do this job properly, you must stick to businesses you understand. Operate within your circle of competence. For instance, Buffett was aware of Apple and its stellar fundamental metrics for a long time but only chose to invest in 2016. Why is that? It is because earlier, he used to think of Apple as a technology company and dismissed it. But then he understood Apple to be a consumer product company with a valuable ecosystem run by a highly capable management team. That understanding gave him the conviction to invest in the co