​​1. There are four steps to investing: (i) find the right company to invest in, (ii) buy it at the right price, maximize upside potential, and (iv) manage risk​. That's it.​​

2. Returns are skewed, so be picky: Only five stocks (Apple, Exxon Mobil, Microsoft, General Electric, and IBM) accounted for 10% of all the wealth created by the entire stock market from 1926–2016. Similarly, only 4% of stocks accounted for all the wealth created by the entire stock market over the same period. The implication?​ You have to be picky if you want to get into the small minority of stocks drive a majority of returns

​3. Cash flow counts: Every company is like a cash flow machine. It's the job of the investor to find a machine that will print out lots of cash flow relative to its purchase price.

4. Don’t make it your goal to outperform the market by 1-2%. Make it your goal to build a seven-, eight-, or nine-figure net worth through the stock market: Warren Buffett was once a regular person like yourself, but he became a billionaire by investing in stocks. Why can’t you get rich as well? Don’t make it your goal to outperform the market by 1-2%. Make it your goal to build a seven-, eight-, or nine-figure net worth through the stock market.

5. Don't try to pick winners - just avoid the losers:​ In an amateur tennis match, the one who wins isn't the one who places the best shots. It's the one who avoids screwing up and just gets the ball over the net. It turns out that investing isn't any different. You don't win by placing the best bets. You win by not screwing up.

6. Never assume big companies are safe companies​​​​: Over 90% of companies that were in the S&P 500 fifty year ago are no longer relevant today. This illustrates an important truth about the business world. Even the very best fall. If history repeats itself, many companies that are market leaders today won’t be market leaders tomorrow. That could include companies like Amazon and Google.​

7. Buy companies so good that no one else can compete against because it's hard to lose money in a company that no one else can compete against​

8. A company needs to have three characteristics in order to have a competitive advantage: It has to do something more valuable than the competition, it's success has to be rare, and it's business model must be difficult  to imitate.

9. "If I had a billion dollars, could I knock them off": An easy way to conclude if a company has a competitive edge is by simply asking yourself, "if I had a billion dollars, could I knock them off?"

10. Spend only 15 minutes researching a company: It doesn't take long to spot a wonderful business. As Buffett says, "if we can't make a decision in five minutes, we can't make it in five months." So don't spend more than just a few minutes researching a company. 

11. First pick the right industry. Then pick the right company - not the other way around: You can be right about the stock, but if you are wrong about the industry, you'll still lose money. Conversely, you can be wrong about the stock and right about the industry, and still make a fortune. So focus on getting into the right industry over the right company. 

12. Don't confuse a booming industry for an attractive industry: The automotive industry was booming in the early 1900s, growing by hundreds of percent per year. But it definitely wasn't an attractive industry as virtually 99% of those automotive companies went bankrupt. The industry was booming, but definitely not attractive. 

13. Economic profits are the biggest predictor of  industry attractiveness: Profit margins and industry growth don't capture an industry's attractiveness as well as economic profits do, so focus on investing in industries that earn high levels of economic profits. 

14. Invest in industries with lots of winners: If lots of companies are winning in an industry, chances are that your company will as well.

15. There are three steps to investing: (i) figure out how much cash flow a company earns, (ii) know how much it costs to invest in the company, and (iii) buy the one that earns the most cash flow relative to its purchase price.

​16. Forget P/E ratios: Earnings is different from cash flow. One is hard cash, the other isn't. And of course, cash flow is what matters when investing--not earnings. And since P/E ratios are based on earnings rather than actual cash flow, it's foolish to make investment decisions based on them.

17. Never buy a stock people expect to do well:In the workplace, employees under-promise and overdeliver. Why? If an employee sets expectations unrealistically high, it becomes hard to surpass expectations (and hence make the boss happy). The same concept applies to stocks. If Wall Street has high expectations for a stock, it’s almost impossible for management to please investors and overdeliver. The result is that the stock almost always underperforms.

18. Instead, buy stocks that nobody wants:​​ Buffett bought $5 billion of Goldman Sachs when no one wanted to own banks during 2008. It turned out well. Sometimes, the best opportunities are buying stocks that nobody else wants.​

19. View Adverse Events as "tiny blips" rather than as total catastrophes​​: If you view every setback as “a total catastrophe,” you’ll never have the courage to buy any company because you’ll think every problem a company faces is the end of the world. 

20. Focus on the customer and ignore all the noise:​ Jeff Bezos tells his executives to focus on the customer and ignore everything else. It turns out you can do the same thing in the stock market. Just focus on investing in companies that make customers happy and ignore all the noise.​​

21. Don't be afraid to pay a premium because you can afford to pay more than you think: You could have paid a 281x P/E ratio for L’Oréal and still outperformed the index between 1973 and 2019. You could have paid a 241x P/E ratio for Altria Group and still outperformed the index over the same period. You could have paid a 70x P/E ratio for Kellogg’s and still outperformed the index over the same period. Sometimes, you can afford to pay more than you think.​

22. Financial analysis is about turning numbers into a story about a company: It's much more valuable to understand the story of a company than whether it has a lot of. cash on its balance sheet. So focus less on assessing a company's financial health and more on understanding the story of a company when reading financial statements.​

23. Sales is the ultimate measure of customer traction: An entrepreneur who sells $10 million worth of products clearly has more customer traction than an entrepreneur who has only sold $50 worth of products. The stock market isn't any different. The more sales a company is generating, the more traction it has from customers. 

24. Focus on industry specific financial metrics: Company A earned 6.6% profit margins. Company B earns 2.2% margins. You would expect Company A to be stronger than B. But the truth is that Company B is stronger than Company A. (Company B is Walmart, and Company A is Target). It turns out that profit margin isn't an effective way to measure the success of retailers. Other metrics like days inventory  outstanding matter much more than profit margins in the retail industry. The lesson? Don't blindly apply the same financial ratios to every single industry. Instead, rely upon industry-specific financial metrics to make investment decisions.

25. You always have time to read financial statements: Charlie Munger is a busy man, but he once found the time to read every single General Motors annual report from 1912 to the present. It took a long time out of his busy day, but he still found the time to do it. The lesson? No matter how busy you are, you always have time to read financial statements 

26. Pressure test businesses: The founder of a multi-billion dollar private equity firm once told me that the secret to his success was stress testing each investment opportunity--seeing how the company's financial performance reacted in response to competitive pressures. An easy way to figure out if a company will withstand the competitive pressures in the future is by researching how the business has responded to  competitive pressures in the past.

27. You can't make money in mature companies: You beat the market by investing in stocks that have more upside than the overall market. Mature companies, by definition, have less upside than the overall market. Hence, they don't outperform the market.

28. What makes growth investing hard is the unpredictable nature of growth stocks: It’s very difficult to predict if a start-up will become successful. Start-up ideas that people thought were dumb in the moment turn out to become wild successes (such as Airbnb). And other start-ups that everyone would become successful turn out to be total disasters (such as Theranos). Growth stocks aren’t that different. Some growth stocks that everyone think will succeed never perform well (such as Snapchat), and others that everyone thought would fail end up becoming successful (such as Tesla).

29. The best investors find a harmony between growth and value: When Buffett invested in Apple, it wasn’t like the typical, early-stage growth company that lacked a proven product. And it wasn’t a mature company that had exhausted all its growth opportunities. It was somewhere in the middle. The best investors buy stocks that have a mix of both growth and value.

30. Anyone can pick 10-baggers: Peter Lynch bought more than a dozen stocks that multiplied over 10 times during his 13-year investment career, according to Forbes. So why can't you pick 10-baggers as well?

31. Picking 10-baggers is about being exposed to the right industry: From 1970 to 2009, Coca-Cola’s stock price multiplied over 60 times without growing its market share--but buy taking advantage of a booming soft drink industry. Sometimes, picking 10-baggers is about picking the right industry.

32. Invest in quality companies with a long-runway for growth: The way you pick a 10-bagger isn't by finding a start-up that becomes the next Amazon. (That's too risky). Rather, it's buy investing in quality companies with a long  runway to grow sales. 

33. Never invest in a company exposed to tail risks: Despite being a conservative investor, Warren Buffett once said that he is "willing to accept huge risks." He is just not willing to accept tail risks. As he says, "a long string of impressive numbers multiplied by a single zero always equals zero. The lesson? Take risk--just not tail risks that can put you out of business. 

34. Every time you sell, you interrupt the compound effect, so do nothing: Investing has three steps: 1. Buy. 2. Hold. 3. Do nothing. (People forget the 3rd one).

35. People are patient for everything in life except their investments: In real life, people can commit to any financial decision for a long period of time. Students will commit 4 years to getting a college degree. Homeowners will commit 30 years to paying off their mortgage. But investors can't stick to holding a world-class company for just 12 months. They sell too soon.

36. Buy one stock every couple of years: Warren Buffett made one major investment every two years. You don’t have to buy very often to get rich.

37. Don't hold cash, Invest in the S&P 500: Holding cash rather than the S&P 500 as you wait for the right investment opportunity is a complete waste of money. Yet, many investors do it. Both Warren Buffett and myself have missed out on hundreds of percent of market gains because we were holding cash rather than investing in the S&P 500 as we waited for the right investment opportunity.

38. Say "no" to good investment opportunities: Steve Jobs once said that "focus isn't about saying 'yes.'.. It's about saying 'no' to hundreds of good opportunities there are." In investing, that means saying “no” to good investment opportunities to focus on the few that are truly wonderful.

39. Focus on a qualitative margin of safety rather than a quantitative one: A quantitative margin of safety is buying a stock well below intrinsic value. A qualitative margin of safety is being 110% confident that a company is a quality business. It's leaving a room for error on quality - not just price. 

40. Stick to your principles: Good investors make bad investment decisions when they deviate from their own investment principles.