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I wrote about how to know if a business is wonderful and on sale – the two requirements to be certain to make money. And then I showed how to use technical tools to follow the institutional investors in and out of a stock in order to lower risk. What I found out after the book came out is that while most people want to improve their financial lives and will read about how to do it, most won’t actually take action if they have to do it every day. Even my agent wouldn’t do her own investing if it required trading and watching it every day. I realized most investors buy and hold because that’s all they really have time to do. So I wrote about how to do it right. I call the book Payback Time. Payback Time is about the proper way to buy and hold a stock. The most critical part of buying and holding is making sure you are buying a good business ON SALE. You’ve got to know what the thing is worth and buy it for a lot, lot less if you want your long term investing results to be spectacular – like 25% a year kind of spectacular. To get returns like that, you have to buy right. I call buying right the Payback Time Price. Payback Time is a concept I borrowed from doing private equity deals. When we buy a private business, we’re not so certain where we are going to sell it. Maybe no one wants it when we want to sell it. So we wanted to be sure we could get our money out of the deal from earnings in a short time. Like 7 years or so. The time it takes to get your money out of a deal is called the Payback Time and its powerful notion because once you have your money out of the deal, you have no risk. You have no downside. You only have potential profit. That is Rule #1 investing. Once you get the idea of how to figure out Payback Time, and you find a wonderful business that’s on sale, you start acquiring it. In the book, I show you how to ‘stockpile’ the stock – when to buy it, when not to. And I show you some very cool ways of determining the time to buy (or sell) depending on price and something things I call The FACs – Floors and Ceilings. These techniques account for some of the biggest fortunes in the world and they can work just as well for you. And here’s the good news for all you investors who basically don’t want to do this but have to – it doesn’t take much time at all. You maybe do something once every few months.
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