Why This Book Exists
Two questions, and the difference between them.
Most people arrive at the stock market with one question, and it is the wrong one. They ask what to buy. The useful version splits in two, and the split is the whole point of this book. The first question is whether a business deserves your money at all. That is a question about the company: what it earns, what it owns, what it owes, and whether the price being asked is sensible given all of that. It is answered by reading financial statements, and it decides most of your outcome over any long horizon. The second question only arises once the first is settled. Given that you want to own something, where do you act, and how will you know if you were wrong? That is a question about price rather than the business, and it is answered by reading charts. Why people get this wrong Buying a chart Acting on a pattern without knowing what the company does. The pattern is a description of a crowd, not of a business. Owning without a plan Buying a good company at any price, with no idea what would make you sell. Being right about the business is not the same as being right about the position. Treating them as rivals Arguing about which discipline is better, when they are answering different questions and you need both. Own good businesses. Act with discipline. Assume you will be wrong often, and arrange things so that being wrong is survivable. Everything in this book is in service of those three sentences. What this book is not It is not a set of rules that make money. There are none, and anyone selling them is selling something else. It is a way of reading: of looking at a company and at a chart and knowing what you are looking at, what it can tell you, and where it will lie to you.
Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Start Here.