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It is wise to think like a business owner and not a ticket holder when making long-term investment decisions. Its value is based on the amount of cash that comes in and out. Business owner: A stock represents a piece of a business.
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Unlike baseball, there are no strikes when you decide not to swing. Mr Market: The stock market is there to serve the investor.If the principles above weren’t a clear enough sign already, Pabrai highlights several concepts from Graham and Buffett that he found valuable: “Heads, I win… Tails, I don’t lose too much” Mohnish Pabraiīenjamin Graham and Warren Buffett had strong influences on Mohnish Pabrai’s investment philosophy. To paraphrase Charlie Munger, investing involves looking for mispriced gambles and knowing when the gamble is mispriced. Bet heavily when the odds are very much in your favour.The larger the margin of safety, the lower the risk of loss on capital. Benjamin Graham once referred to this idea as the margin of safety. Buy businesses at large discounts to its intrinsic value.My point is to be careful with blanket application of principles) For example, we might classify low-risk companies that focus on excellent customer service as innovators. (Remember that this principle is in reference to high-risk ventures. These companies tend to carry lower risk and yield greater rewards. By contrast, it is easier to choose good companies that can execute, lift and scale a combination of existing ideas. Pabrai believes that finding and investing in excellent innovators is difficult. Companies with durable and widening advantages can generate better returns on invested capital over the long term. This is a reminder to focus not only on company growth, but on the durability and magnitude of its competitive advantage. Buy businesses with durable and widening competitive advantages.
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Is the business truly simple if it is in distress? This is where judgement and experience comes in.) (Note that this principle may conflict with the one above. This rule may also apply to stocks in temporarily distressed countries, but investors should treat country-risk with even greater caution. The odds of buying stocks at large discounts to its intrinsic value are higher here.