5 basic principles for stock portfolio:1) Think independently. “We try to be skeptical of conventional wisdom, and try to avoid the waves of irrational behavior and emotion that periodically engulf Wall Street.”
2) Invest in high-return businesses that are run for the shareholders. “Cash flow, which is more difficult to manipulate than reported earnings, is a useful additional yardstick.”
3) Pay only a reasonable price, even for an excellent business. “Even the world’s greatest business is not a good investment, if the price is too high.”
4) Invest for the long term. “Moving in and out of stocks frequently has two major disadvantages that will substantially diminish results: transaction costs and taxes. Capital will grow more rapidly if earnings compound with as few interruptions for commissions and tax bites as possible.”
5) Do not diversify excessively. “The more diversification, the more performance is likely to be average, at best.”
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