Pat Dorsey's five rules still hold up after all these years.
Most people ignore rule #1 — do your homework — because it's boring. They'd rather chase tips or follow someone else's conviction.
Rule #2 is about finding companies with moats. Not just good businesses, but ones that can defend their turf for a decade.
Rule #3: have a margin of safety. Never pay full price for anything, no matter how good it looks.
Rule #4: hold for the long term. This is where most people fail. They buy right, then sell at the first sign of trouble or boredom.
Rule #5: know when to sell. Sounds simple, but it's the hardest one. You need a reason that's not emotional.
The rules are simple. Following them is not.
Most people ignore rule #1 — do your homework — because it's boring. They'd rather chase tips or follow someone else's conviction.
Rule #2 is about finding companies with moats. Not just good businesses, but ones that can defend their turf for a decade.
Rule #3: have a margin of safety. Never pay full price for anything, no matter how good it looks.
Rule #4: hold for the long term. This is where most people fail. They buy right, then sell at the first sign of trouble or boredom.
Rule #5: know when to sell. Sounds simple, but it's the hardest one. You need a reason that's not emotional.
The rules are simple. Following them is not.