Can anyone really learn to build wealth like legendary investors Warren Buffet, Charlie Munger, and Benjamin Graham? Yes, I think anyone with the desire and discipline can. Phil Town, the author of Rule #1 Investing, turned $1000 into $1.45 Million in only 5 years. Continue reading to discover how he did it.
What is Rule One Investing?
If you want to know how to invest like Warren Buffet and many of the top hedge fund managers, read Rule #1: The Simple Strategy for Getting Rich–in Only 15 Minutes a Week! The title of the book comes from Buffet’s rules for investing which are #1 Don’t lose money and #2 Remember rule #1.
Rule One Investing is a simple, yet extremely logical approach to creating wealth through investing in corporate stocks. It stresses the importance of remaining rational and understanding the business you invest in. Contrary to the popular strategy of diversifying your investment portfolio to spread the risk of loss, Rule One Investing focuses on only a few companies. The risk is minimized with the Rule 1 strategy by thorough research and analysis of the company.
Rule #1 is the author’s, Phil Town, style of Value Investing. Value Investing analyzes a stock’s potential for growth based on its intrinsic value, a system developed by Benjamin Graham. It was Graham who taught Warren Buffet and it was a student of Buffet who taught Phil Town.
Phil Town did not start out to be a successful investor and hedge fund manager. In 1980, he was a Grand Canyon river guide making $4,000 a year. Then he met the man who had learned to invest from Warren Buffet.
“Follow Town’s simple, time-tested precepts, and even unsophisticated investors will leave most mutual fund managers in the dust.” Arthur Levitt, Former Chairman, SEC.
“Rule #1 is the clearest & best book out there to get you on the path to riches.” James Cramer, Host of CNBC’s Mad Money and a co-founder of TheStreet, Inc.
Warren Buffet and Benjamin Graham.
Buffet learned from Benjamin Graham, his teacher at Columbia Business School and the author of The Intelligent Investor. Graham is said to be the father of “Value Investing,” an investment strategy that has proven itself since 1930.
In his book, Rule #1, Phil Town strips away the confusing language of investing professionals and teaches Value Investing as a simple strategy anyone can use to build wealth.
Buy Low. Sell High.
The success of this strategy is based on the simple concept of buying low and selling high. Rule #1 shows you how to buy the stock at a 50% discount when the market has mispriced them too low and then sell them when the market has mispriced them too high.
Rule #1 Investing begins with finding a stable company with good management that you can understand and that you like, and that also has a durable advantage in the marketplace. A durable advantage is an edge a company has over the competition. This durable advantage might be a brand or patent or a regional monopoly.
With a durable advantage, the future value of a company’s stock can be determined with a reasonable degree of accuracy.
Based on the future value of a company’s stock, we can extrapolate the current value of each share. Once we know the current value, we can easily calculate the 50% discount price. When we know the discounted price, we wait for an event that will cause the stock to go on sale.
Patience is a Virtue.
Here is where Rule #1 Investing is different. As a Rule #1 Investor, you wait for as long as it takes for the stock to go on sale. It could be months or it could be years before an event occurs to knock the price down to the bargain range.
Maybe the event is an oil spill that drives down the stock price of an oil company or an E. Coli outbreak in a restaurant chain. As I write this, the threat of tariffs on imported Chinese goods is driving down the stock price of discount stores.
Naturally, you watch several stocks so the odds are good that one will go on sale within a reasonable time.
Fear and Greed.
The price of a stock is governed by fear and greed.
A wise investor buys on fear when an event has spooked everyone else into selling. And, the wise investor sells on greed, when everyone else is in the throes of irrational exuberance and over-paying for stock.
The key to succeeding with Rule #1 Investing is to understand the true value of a stock. That’s where the analysis taught in Rule #1 is essential. Through analysis, you will know if an event will destroy a company or merely knock the stock price down for a few months. Buy low. Sell high.
The principles of Rule #1 Investing have been around for nearly 80 years. However, for most of this time, getting the necessary information was difficult and laborious. Phil Town’s Rule #1 brings the strategy of Graham and Buffet into the information age. Now anyone can find the information they need online and use it to create wealth.
Essential to success with this strategy is to find solid companies. It starts with companies you are familiar with and that you like. Phil Town also has resources that significantly speeds up the process of finding worthy companies to consider.
The Small Investor Advantage.
Because hedge fund managers manage huge sums of money, they cannot move in or out of the market quickly. If they move too quickly, they might crash the market.
Hedge fund managers must take weeks or months to move in or out of a market position. As a small investor, we have a massive advantage. We can move in or out of the market in minutes. If we’re observant, we will see what the large hedge fund managers are doing and get in or out ahead of them.
If you want to know how to invest in stocks, buy this book. It will teach you the foundation of Value Investing.
More than the Book.
If all you have is the book and determination, it’s possible to become a successful investor. However, Phil Town has a lot of resources to help you master Rule #1 Investing, including online tools, a YouTube channel, and a free weekend workshop.
I had the good fortune of attending Phil Town’s free workshop. While there, I met several people who have succeeded with Rule #1 Investing, including several hedge fund managers.
Rule #1 will not make you rich overnight, but it will show you how to earn a minimum annual rate of return of 15%. The promise of creating wealth in only 15 minutes a week may be factually true AFTER you learn the strategy. However, the most successful investors continue to read all things related to the companies whose stock they own.
In my experience, people I have introduced to Rule #1 Investing react in one of two ways. It either bores them to tears or it excites them so much they can’t sleep.
When I first discovered Rule #1 Investing, I thought I had found the keys to the kingdom. At the workshop, most of the people shared my enthusiasm.
If the idea of learning to invest like Warren Buffet excites you. Buy the book. Read it. It’s a small price to pay for all you will learn. After you read the book, go to Phil Town’s free workshop. It really is free, no gimmicks, no gotchas, and nobody will try to sell you anything.
Where to Begin.
Beyond buying the book and attending Phil’s free workshop, you will need money to invest. Expect to deposit a minimum of $2000 to open a brokerage account.
If you don’t have the money to invest, consider starting an online business. The Online Entrepreneur Certification Course will show you how to launch a profitable affiliate marketing business. The first 10 lessons are free.
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