The Dhando Investor
By: Mohnish Pabrai
This book was recommended to me by one of my friends when I was just getting interested in investing and finance. This book sparked my interest and showed me the possibilities of the world of investing. This book is one of my favourites due to its simple yet effective structure. The author tells a story of his family, how they started their business and how they grew it into an empire. It teaches simple lessons along the way and uses examples from the story to show how important discipline, clarity and focus is. Some of these lessons include the power of compounding, how to gauge risk levels and different types of investing strategies. The story itself, apart from the investing lessons, is very captivating as it is applicable, relatable and observable in today's world. The structure of the lessons take a path of natural progression and make it easy for the reader to understand the main concepts. The nine steps given in the book which constitute the framework of Mohnish Pabrai's investing style are listed below.
1. Focus on buying an existing business
2. Buy simple businesses in industries with an ultra-slow rate of change
3. Buy distressed business in distressed industries
4. Buy businesses with a durable competitive advantage
5. Bet heavily when the odds are in your favour
6. Focus on arbitrage
7. Buy businesses at big discounts to their underlying intrinsic value
8. Look for low-risk, high uncertainty businesses
9. It's better to be a copycat than an investor
Putting all the lessons and advice together from this book, we can derive one simple mantra about what the Dhando method of investing is all about. "Dhando is all about minimizing the risk and maximizing the reward." My investing style is still based around this framework and I constantly find myself referring back to this book to remind myself of the investing basics.
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