Inversion: Destroy Your Investment Idea Before You Invest (Part 5) (012)

Part five of an ongoing series on Warren Buffett and Charlie Munger's 4 principles of investing. We walk through these investing principles in the form of a checklist that you can download here: https://investionista.com/checklist/

We go through these steps in a company before we invest in its stock. The 4 investing principles/steps we discuss in this series are: 1) Understanding the business (circle of competence), 2) Management (honest & competent), 3) Moat (favorable long term prospects), and 4) Margin of Safety (available at an attractive price). A bonus, or 5) Inversion to make sure you fully understand the potential drawbacks of an investment idea.  

Charlie Munger is famous for saying "invert, always invert" to destroy your best loved investment idea and understand all of the reasons why one should not invest in a particular asset. We discuss a few examples among Costco, Peloton, and more.