### Thoughts

Simple and concise.

• It is generally a good idea to invest your money.
• You should buy shares in a company when they are at a discount of your estimated value.
• But you probably don't know how to estimate that value, so don't try. You'll loose your money.
• Good indicators of value are 'earnings yield' and 'return on capital.' Especially when combined.
• Earnings yield can be found by dividing the earnings per share with the share price.
• Return on capital is found by how much they get back as compared to how much of their capital they invested. If they open a factory, and it earns them $200.000, and it cost them$100.00 to open it, that is a 50% return on capital - which is pretty good.
• Because you don't know how to invest on your own, this is the magic formula that you follow.
• First, make a list of the largest 3500 companies in the US exchange. Then sort by return on capital.
• Secondly, do that again - but this time for earnings yield.
• Third, combine those two lists. This gives you a ranked list of companies, ranked by both their return on capital and earnings yield.
• The goal is to buy 20-30 stocks, such that, on average, you find good deals. So you buy the top 20-30 stocks. Any given individual stock may perform 'not so well', but on average, you'll do pretty great.
• However, you should space out your investments. A good rule of thumb is to invest 30-40% of your intended investment every quarter for a year.
• This magic formula seems to have worked very well in the past. And it will probably work well in the future, because it is simply a ranking formula.
• However, it does not work for shorter timespans. But it does seem to work on longer timespans.