“Keep it simple.”
I reiterate the title from Chapter 3 because if there is one thing you should remember from reading this book, it is to buy only good companies!
It isn't that other companies won't make you money. They may make you a lot of money. Donald Yacktman didn't buy Chrysler because the auto industry was not the place he wanted to be, not because Chrysler wouldn't make him money. If you buy only good companies, your chance of making money is much improved and the journey is far more pleasant.
Peter Lynch can make money anywhere; he knows about every industry and how to succeed in every investing situation, and he owns thousands of stocks. But you don't have to be like Lynch; as Charlie Munger said: “You don't have to know everything. A few really big ideas carry most of the freight.”1
A woman calls in a plumber when her washing machine breaks down. The plumber arrives, studies the machine, then takes out a hammer and gives it a hefty whack. The washing machine starts working again, and the plumber presents her with a bill for $200. “Two hundred dollars?” says the woman. “All you did was hit it with the hammer.” So, the plumber presents her with an itemized bill: Hitting washing machine with a hammer: $5. Knowing where to hit it: $195.
This joke has been used in many situations to enlighten people on how, and where, to focus their effort. When it comes to investing, buy only good companies! ...