Hi everyone,
I hope you all had a good start into 2025! This time I want to share some thoughts on things I often come across on social media. There’s no shortage of investing quotes out there, but I frequently find myself frustrated by the sheer amount of nonsense being spread.
Investing in easy understandable businesses and what you know
You'll often hear the phrase “invest in easy businesses,” a mantra popularized by legendary investors like Warren Buffett—whom I also greatly admire. But what exactly qualifies as an easy business? And what does it really mean to know a business?
Reading a 10-K doesn’t mean you truly understand a company. While grasping the basics of a business model or its products might be relatively simple, understanding its underlying economics is a different challenge. The deeper you dive into business models and financial dynamics, the more you realize that while the concepts themselves may not be overly complex, gaining full insight as an outsider is incredibly difficult.
From my perspective, having a solid basic understanding is enough—because unless you're an insider, such as someone working in the industry or within the company itself, you’ll never have access to the full picture anyway.
Concentrating the portfolio
I often come across statements like “How many stocks should you own?” or “More than 20 is too much,” followed by a lot of oversimplified advice. Let’s break this down into three key points:
1. The number of stocks you own is entirely up to you.
If you believe you’ve found 100 great stocks, go for it. If you think five is enough, that works too. I’m not a believer in rigid portfolio theory or the so-called ideal mix of stocks. In the end, I don’t think it matters that much.
As a retail investor, whether you hold five stocks or 100, you’ll never be able to track them as closely as a full-time analyst who gets paid to do it. But here’s my take: if you’re investing in high-quality businesses, you don’t necessarily have to follow every detail on a daily basis.
2. Concentration isn’t just about the number of stocks—it’s about weighting.
You could own 100 stocks, but if 95% of your wealth is concentrated in just one, your portfolio is anything but diversified. It all comes down to your personal risk tolerance. If you’re comfortable with that level of concentration and the risks that come with it, then go for it.
3. The myth of the billionaire investor’s concentrated portfolio.
People love to point to billionaires like Buffett, Bezos, Zuckerberg, or Musk, saying they built their wealth by concentrating their portfolios. But let’s be clear: they didn’t get rich by holding a few stocks—they became wealthy because they ran their own businesses and were the key decision-makers.
Now ask yourself: do you really want to put all your money into a single stock when, beyond a few voting rights, you have no real influence over the company’s future?
The reality for retail investors
We have to acknowledge our limitations. We will never have full insight into a company, nor will we personally know its leadership. No matter how successful a business appears, there’s always a risk—however small—that it could collapse overnight due to a scandal or an unforeseen crisis.
So, the real question is: Are you willing to take that risk?
Spreadsheets
It's often said that analyzing and valuing a company should be easy without using a spreadsheet. I frequently come across statements like, "If you need a spreadsheet, it's too complex," or see images of Warren Buffett's office—no computer in sight—as if that should be the ultimate model for all investors.
But let’s be honest: most of us are not Warren Buffett, nor do we possess his level of brilliance. These kinds of statements are, frankly, nonsense. Even something as simple as visualizing net sales development over the past five years would be difficult without a spreadsheet. How do you calculate key ratios and KPIs across multiple years or quarters and have a clear overview in front of you without one?
Of course, you don’t need six monitors to make great investment decisions, but simply reading a few 10-Ks without running any calculations in a spreadsheet won’t give you a real understanding of a company's economics. Spreadsheets are essential tools for structuring financial data, identifying trends, and making informed decisions.I'm glad I didn’t read this book at the start of my investing journey because I probably would have given up after just a few pages. While it covers some fundamental investing principles, much of it is dense and difficult to digest.
The intelligent investor is the best investing book
I'm glad I didn’t read this book at the start of my investing journey because I probably would have given up after just a few pages. While it covers some fundamental investing principles, much of it is dense and difficult to digest.
I’m not saying you should never read it, but if you're just starting out, I wouldn't recommend it. A quick Google search or even asking ChatGPT will give you a solid understanding of the basics. As you gain more experience, you’ll naturally come across the book and its concepts. At that point, you'll be better equipped to appreciate its insights.
Thanks for being here and for your continued support! In my next Investment Journal post, I’ll take a closer look at my portfolio and what has happened since the last update.
Have a great weekend, and see you soon!
An excellent post.
You have touched on lots of important topics. Keep up the good work.