Your One-Page Guide to Investing Like Buffett

NoteTL;DR

• Everything from this series, condensed into one checklist
• Most opportunities should be rejected — that’s the point
• You don’t need many investments. You need a few great ones.
• The math is simple. The hard part is patience and discipline.

The Complete Checklist

Everything from this series, in one place. Print it. Use it.

Step 1: Do I Understand This?

If you can’t explain it simply, you don’t understand it well enough.

Ask yourself:

• Can I explain how this business makes money in one sentence?
• Do I know who buys from them and why?
• Can I picture what this company looks like in 10 years?
• Could I explain this investment to a skeptical friend?

If any answer is “no” → Don’t invest

You can’t value what you don’t understand. Doesn’t matter how cheap it looks.

Step 2: Does It Have Staying Power?

What stops competitors from stealing the customers?

The key test:

• Can they raise prices 10% without losing customers?

If yes, there’s something real protecting this business. If no, there probably isn’t.

Also ask:

• Is this a low-cost leader OR a strong brand? (These are the two real moats)
• Will this advantage still exist in 10 years?
• Does the advantage depend on specific people who could leave?

If they can’t raise prices → Don’t invest

Most claimed advantages aren’t real. Be skeptical.

Step 3: Is Management Trustworthy?

Would you want these people managing your money?

Look for:

• When they keep profits in the company, does value increase?
• Do they admit mistakes and share bad news honestly?
• Do they resist doing dumb things just because competitors are doing them?
• Do they own significant stock themselves?

If they waste money → Don’t invest

Even wonderful businesses can be ruined by managers who make bad decisions.

Step 4: Is the Money Real?

What could you actually take out each year?

Remember the formula from Part 2:

Real Cash = Reported Profits + Accounting Adjustments − Money Needed to Maintain the Business

Ask:

• How much real cash does this business generate?
• Has this been stable over time, or does it jump around?
• Is the real cash very different from the reported profits?

If real cash is declining or unpredictable → Be very careful

Step 5: What’s It Worth?

Back-of-envelope is fine. If you need a spreadsheet, it’s probably not cheap enough.

Simple approach:

1. How much real cash does it generate today?
2. How fast is it likely to grow? (Be conservative)
3. What would someone pay for a business like this in 10 years?
4. Compare that to what else you could do with the money (government bonds paying ~4-5%)

If the number doesn’t scream “this is a good deal,” move on.

Step 6: Is There Enough Safety Cushion?

How much below your estimated value should you pay?

How confident are you?	Pay at least this much below value
Very confident — stable, predictable	25-30% discount
Somewhat confident — good business, some unknowns	35-50% discount
Less confident — decent business, real uncertainty	50%+ discount

If the current price is higher than your max → Don’t buy. Wait.

Step 7: Does It Scream at You?

The most important test

• Would someone else agree this is cheap, even without seeing your analysis?
• Is the discount so big that even if you’re significantly wrong, you’ll be okay?
• Can you explain why this is a good deal in 30 seconds?

If you have to convince yourself → Don’t invest

Buffett: “If it doesn’t scream at you, it’s too close.”

Step 8: Does the Return Beat Your Alternatives?

Just because it’s cheap doesn’t mean it’s good enough

• What annual return do you expect at this price?
• Is it above 10%?
• Is it better than your other options?

If expected return is below 10% → Don’t invest

Even with a safety cushion, don’t accept mediocre returns.

The Simple Flowchart

Do I understand this business?
  ├─ No → DON'T INVEST
  │
  ▼
Can they raise prices without losing customers?
  ├─ No → DON'T INVEST
  │
  ▼
Is management trustworthy with money?
  ├─ No → DON'T INVEST
  │
  ▼
Is the real cash flow predictable?
  ├─ No → DON'T INVEST
  │
  ▼
Is the price obviously below what it's worth?
  ├─ No → WAIT (add to watchlist)
  │
  ▼
Does it scream "buy me"?
  ├─ No → DON'T INVEST
  │
  ▼
Will the return beat 10%?
  ├─ No → DON'T INVEST
  │
  ▼
INVEST

Notice: most paths lead to “Don’t Invest.” That’s the point.

How Much to Invest

When everything checks out, how big should the position be?

Buffett’s view: “Wide diversification is for people who don’t know what they’re doing.”

How confident?	How much to invest
Extremely confident — deeply understood	15-25% of portfolio
Very confident	10-15%
Confident	5-10%

If you’re not confident enough to put 5% in, you’re probably not confident enough to invest at all.

Don’t spread tiny amounts across dozens of stocks. Concentrate on your best ideas.

When to Sell

Most of the time: don’t.

But sell if:

1. The advantage is fading — Competitors are catching up
2. Management gets worse — New leaders waste money
3. You were wrong — Your original thinking was flawed
4. Price gets crazy — It’s now way above what it’s worth (like Apple going from 10x to 33x profits)
5. Something better appears — Your money could work harder elsewhere

Don’t sell just because:

• The price went up (that’s good!)
• The price went down (that’s temporary, unless something broke)
• You’ve held it “a long time”
• Analysts are negative

Buffett’s favorite holding period: forever.

The Hard Part (It’s Not the Math)

The framework is simple. Following it is hard.

What this approach requires:

1. Patience — Most opportunities don’t pass the tests. You might wait months or years.
2. Courage — When something screams, you have to actually buy. Significantly.
3. Stubbornness — When prices drop after you buy, you hold. (Unless something actually broke.)
4. Humility — When you’re wrong, admit it and move on.

What will fight against you:

• Fear of missing out — “Everyone’s buying this. What if I miss it?”
• Need to do something — “My money is just sitting there. I should invest in something.”
• Following the crowd — “Smart people are buying this. It must be good.”
• Wishful thinking — “I want this to be good, so I’ll convince myself it is.”
• Anchoring — “It’s cheaper than last month, so it must be cheap.”

The math is easy. The psychology is the real challenge.

The Whole Series in One Table

Part	What It Covers	Key Idea
1	What’s a business really worth?	The cash you can take out over time
2	Owner earnings	Real cash = Profits + Fake expenses − Real expenses
3	Why Buffett ignores Wall Street formulas	Simple beats complicated
4	Stay in your lane	Only invest in what you understand
5	What keeps competitors away	Pricing power is the ultimate test
6	Why smart managers make dumb decisions	Resist the herd
7	Comparing investments	Beat government bonds + 10% minimum
8	Buying a dollar for fifty cents	Always demand a discount
9	The power of saying no	If it doesn’t scream at you, walk away
10	See’s Candies	Great business at fair price beats cheap business
11	Coca-Cola	The world’s best brand was underpriced
12	Apple	Same principles work even for “tech”

The 20 Punch Card Rule

Imagine you could only make 20 investments in your entire life.

Not 20 per year. 20 total. Ever.

How would that change your behavior?

• You’d say no to almost everything
• You’d research deeply before committing
• You’d make bigger bets on your best ideas
• You’d stop trading and start truly investing

This framework is designed for that world. It filters ruthlessly because you don’t need many investments. You need a few great ones.

Most of your time will be spent: - Learning — Expanding what you understand - Waiting — For prices to become attractive - Holding — Letting compounding do its work

Very little time actually buying.

NoteFinal Summary

Investing like Buffett isn’t about complex math. It’s about:

1. Understanding — Only invest in what you can explain simply
2. Staying power — Look for advantages that last
3. Good management — People who don’t waste money
4. Real cash — Money you could actually take out
5. Simple comparisons — Beat the safe alternative
6. Safety cushions — Always pay less than it’s worth
7. Saying no — Most opportunities aren’t good enough
8. Acting decisively — When something screams, buy

The math is simple. The discipline is hard. But applied consistently over a lifetime, this approach builds wealth.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

— Warren Buffett

Thank You

This concludes the series on investing like Warren Buffett.

The principles are timeless. They worked in 1972 (See’s), 1988 (Coca-Cola), 2016 (Apple), and they’ll work for whatever opportunity comes next.

The question is: when your screaming opportunity arrives, will you be ready?

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Full Series Index

1. What a Business is Really Worth
2. The Money That Actually Lands in Your Pocket
3. Why Buffett Ignores Wall Street’s Favorite Formula
4. Stay in Your Lane
5. What Keeps Competitors Away
6. Why Smart Managers Make Dumb Decisions
7. The Simplest Way to Compare Investments
8. Buying a Dollar for Fifty Cents
9. The Power of Saying No
10. The $25 Million Lesson That Made Buffett Billions
11. How Buffett Turned $1 Billion into $27 Billion
12. Why the ‘Tech-Avoider’ Bet $31 Billion on Apple
13. Your One-Page Guide to Investing Like Buffett (this post)