Back to Basics

Here is something you might want to read if you are a rookie.

Mozart and Investing

At last year's Berkshire Hathaway shareholders meeting, Munger told a story of composing great Wolfgang Mozart. It goes something like this:

A young man, around 25 years old, goes to Mozart and asks him for advice on writing symphonies. Mozart suggests to him that he is too young to write symphonies. The young man gets confused and reminds Mozart that Mozart himself had been writing symphonies since he was 10 years old. Mozart responds, "Yes, but I wasn't asking anyone for advice."

Humbling, isn't it? More importantly, this story can easily be related to the world of investing.

It's important to remember exactly what we're doing when we invest: We're purchasing an ownership stake in a company. That said, successful investing requires a breadth of knowledge about all sorts of things: the industry, management, consumers, the economy -- and that's just to gauge the prospects of the company. On top of that, in order to ensure you bag your investments at an attractive price, you'll need to grapple with the world of valuation -- which will require knowledge of everything from free cash flow to net present value.



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