Facebook Pixel
Searching...
English
EnglishEnglish
EspañolSpanish
简体中文Chinese
FrançaisFrench
DeutschGerman
日本語Japanese
PortuguêsPortuguese
ItalianoItalian
한국어Korean
РусскийRussian
NederlandsDutch
العربيةArabic
PolskiPolish
हिन्दीHindi
Tiếng ViệtVietnamese
SvenskaSwedish
ΕλληνικάGreek
TürkçeTurkish
ไทยThai
ČeštinaCzech
RomânăRomanian
MagyarHungarian
УкраїнськаUkrainian
Bahasa IndonesiaIndonesian
DanskDanish
SuomiFinnish
БългарскиBulgarian
עבריתHebrew
NorskNorwegian
HrvatskiCroatian
CatalàCatalan
SlovenčinaSlovak
LietuviųLithuanian
SlovenščinaSlovenian
СрпскиSerbian
EestiEstonian
LatviešuLatvian
فارسیPersian
മലയാളംMalayalam
தமிழ்Tamil
اردوUrdu
The 80/20 Investor

The 80/20 Investor

Investing in an Uncertain and Complex World - How to Simplify Investing with a Single Principle
by David Schneider 2016 215 pages
3.94
50+ ratings
Listen

Key Takeaways

1. The 80/20 Principle: Less Effort, More Results in Investing

"Only very few actions determine investment success, and to focus on these and to ignore anything else."

Simplicity is key. The 80/20 principle, also known as the Pareto Principle, suggests that 80% of results come from 20% of efforts. In investing, this means focusing on the few crucial decisions that truly matter, rather than constantly trading or overcomplicating strategies.

Quality over quantity. 80/20 Investors make fewer, but higher-quality decisions. They:

  • Focus on understanding a few great opportunities deeply
  • Wait patiently for the right moment to invest
  • Commit significant capital when they do invest
  • Hold investments for the long term, allowing compound interest to work its magic

By adopting this approach, investors can achieve better results with less stress and time commitment, allowing them to focus on their primary careers or other interests.

2. Cash Management: The Foundation of 80/20 Investing

"Pay yourself first."

Build your cash engine. The cornerstone of 80/20 Investing is having a steady stream of cash to invest. This starts with consistently saving a portion of your income, ideally 10% or more, before any other expenses.

Cash provides options. A robust cash reserve:

  • Allows you to take advantage of opportunities when they arise
  • Provides psychological comfort during market downturns
  • Prevents forced selling of investments at inopportune times

Develop a habit of regular saving, and treat it as non-negotiable. This cash flow, combined with patience, puts you in a position of strength when investment opportunities present themselves.

3. Circle of Competence: Invest in What You Know

"The only successful way to invest is to know what you are investing in, and to know it cold."

Leverage your expertise. Focus on industries, companies, or assets that you understand deeply, either through professional experience, personal interest, or dedicated study. This knowledge gives you an edge in identifying truly attractive opportunities.

Build confidence. When you invest within your circle of competence:

  • You can better assess the true value of an investment
  • You're more likely to hold steady during market volatility
  • You can make more informed decisions about when to buy or sell

Continuously expand your circle of competence through learning and experience, but don't feel pressured to invest in areas you don't understand well.

4. No-Brainer Opportunities: Patience Pays Off

"Markets are not an intellectual concept that is omnipresent, all knowing, and perfect. The market is made up of real humans, with all their strengths and all their weaknesses."

Wait for the fat pitch. No-brainer opportunities are investments that offer such compelling value that the decision to invest is obvious. These often arise during times of market panic or when specific assets fall out of favor.

Characteristics of no-brainer opportunities:

  • Large margin of safety (significant discount to intrinsic value)
  • Within your circle of competence
  • Strong potential for long-term growth or income

By patiently waiting for these opportunities and acting decisively when they appear, 80/20 Investors can achieve outsized returns with reduced risk.

5. Magic Categories: Where to Find Investment Opportunities

"Obey the seasons!"

Recognize recurring patterns. The "Magic Categories" are situations that consistently provide attractive investment opportunities:

  1. Your personal circle of competence
  2. Global market crises
  3. Single country crises
  4. Individual industry crises or single asset class depressions
  5. Single business/company crises

Be prepared. By understanding these categories:

  • You can anticipate where future opportunities might arise
  • You'll be mentally prepared to act when others are fearful
  • You can focus your research and attention on the most promising areas

Develop a watchlist of potential investments within these categories, and be ready to act when prices become attractive.

6. Focus Portfolio Management: Quality Over Quantity

"Practice 'Focus Portfolio management' focusing only on the so-called no-brainers."

Concentrate on your best ideas. Rather than over-diversifying, 80/20 Investors build concentrated portfolios of their highest-conviction investments. This approach:

  • Simplifies portfolio management
  • Allows for deeper understanding of each holding
  • Can lead to superior returns if executed well

Implement gradually. When investing:

  • Use a "step-in" plan, buying in tranches over time
  • Start with smaller purchases to test the waters
  • Increase position sizes as your conviction grows or prices become more attractive

Remember, it's better to own a few great investments than many mediocre ones.

7. Investor Psychology: Your Worst Enemy is Yourself

"The investor's chief problem and even his worst enemy is likely to be himself."

Recognize emotional pitfalls. The biggest obstacles to investment success are often psychological:

  • Greed: Chasing hot trends or overconfidence
  • Fear: Panic selling during downturns
  • Impatience: Overtrading or abandoning sound strategies

Develop safeguards. To combat these tendencies:

  • Use checklists to ensure rational decision-making
  • Cultivate a network of like-minded investors for support and perspective
  • Focus on your day job or other interests to avoid obsessing over short-term market movements

By understanding and managing your emotions, you can avoid costly mistakes and stick to your long-term investment strategy.

8. The Structural Advantage of 80/20 Investors

"80/20 Investors don't compete for returns. They don't have to."

Leverage your unique position. As an individual investor, you have several advantages over professional money managers:

  • No pressure to be fully invested at all times
  • Ability to hold cash and wait for exceptional opportunities
  • Freedom to concentrate on your best ideas
  • No need to report short-term performance to clients

Embrace volatility. Unlike institutions that fear volatility, 80/20 Investors can:

  • View market downturns as opportunities to buy
  • Hold investments through rough patches without facing redemptions
  • Focus on long-term results rather than short-term fluctuations

By understanding and capitalizing on these structural advantages, 80/20 Investors can achieve superior results with less effort and stress than conventional approaches.

Last updated:

Review Summary

3.94 out of 5
Average of 50+ ratings from Goodreads and Amazon.

The 80/20 Investor offers a simple investing approach for individual investors. Readers appreciate its straightforward principles and long-term focus, though some find it better suited for those with prior investing experience. The book emphasizes patience, waiting for "no-brainer" opportunities, and maintaining a balanced life outside of investing. While some criticize its length and occasional lack of depth, many find its minimalist approach refreshing. Overall, readers value its emphasis on rational, low-effort investing and building wealth through consistent saving and strategic decision-making.

About the Author

David Schneider is a former banker and asset management professional with international experience in major financial centers. He trained in Germany and studied in London and Tokyo, gaining expertise in investment banking and asset management. Since 2011, Schneider has transitioned to become an independent investor, entrepreneur, and writer. He co-hosts The 80/20 Investing Show, a financial podcast covering investing, financial markets, and personal wealth management. Schneider's diverse background in finance and his shift to independent work inform his approach to investing and financial education.

Download PDF

To save this The 80/20 Investor summary for later, download the free PDF. You can print it out, or read offline at your convenience.
Download PDF
File size: 0.28 MB     Pages: 9

Download EPUB

To read this The 80/20 Investor summary on your e-reader device or app, download the free EPUB. The .epub digital book format is ideal for reading ebooks on phones, tablets, and e-readers.
Download EPUB
File size: 3.02 MB     Pages: 7
0:00
-0:00
1x
Dan
Andrew
Michelle
Lauren
Select Speed
1.0×
+
200 words per minute
Create a free account to unlock:
Bookmarks – save your favorite books
History – revisit books later
Ratings – rate books & see your ratings
Unlock unlimited listening
Your first week's on us!
Today: Get Instant Access
Listen to full summaries of 73,530 books. That's 12,000+ hours of audio!
Day 4: Trial Reminder
We'll send you a notification that your trial is ending soon.
Day 7: Your subscription begins
You'll be charged on Nov 28,
cancel anytime before.
Compare Features Free Pro
Read full text summaries
Summaries are free to read for everyone
Listen to summaries
12,000+ hours of audio
Unlimited Bookmarks
Free users are limited to 10
Unlimited History
Free users are limited to 10
What our users say
30,000+ readers
“...I can 10x the number of books I can read...”
“...exceptionally accurate, engaging, and beautifully presented...”
“...better than any amazon review when I'm making a book-buying decision...”
Save 62%
Yearly
$119.88 $44.99/yr
$3.75/mo
Monthly
$9.99/mo
Try Free & Unlock
7 days free, then $44.99/year. Cancel anytime.
Settings
Appearance