From Mark Ford, founder, Palm Beach Research Group: The whole time I spent getting rich, only a small portion of my net investable wealth was in stocks. Maybe 2% to 3%. And almost all of that was in no-load index funds.

Then I read Mary Buffett and David Clark’s The Warren Buffett Stock Portfolio and I became a convert to Buffett’s philosophy of stock investing.

What Buffett has been doing with Berkshire Hathaway for the past 10 years or so, I’m told, differs in some ways from the stock investing strategy explained in David Clark’s book. I based my strategy on that original concept. I’ve been doing it now for five years and so far it’s produced very good results.

The strategy comprises six simple rules:

  1. Invest only in big, simple businesses that dominate their industry because of some advantage they have that others lack.

  2. Don’t worry about year-by-year profits. Invest for the long term. (And by that I mean 10 years or more.)

  3. Don’t invest in companies you don’t understand. You don’t need to know the company inside and out, but you at least need to understand how they sell to their customers, why their customers prefer them, and why it is that they’re likely to continue dominating their industries.

  4. Whenever possible, invest in “investor-friendly” businesses—companies with a long-term history of paying dividends to their investors year in and year out.

  5. It’s also nice if the company has lots of cash and an easy debt load.

  6. Never overpay. Even the world’s best companies can be overpriced. And if you buy them when they are, it may take you a long, long time to make up for your overpayment.

As I said, I used to put my stock money in no-load index funds. The idea there was to have some of my wealth in the stock market and expect, over time, that the return I would get would be equal to the market, plus or minus a percent.

I still think that’s a pretty good strategy for beginners or people that have zero interest in managing their own stocks. But I do think that the portfolio of stocks I have now, based on the six rules above, will give me more power and endurance than an index fund with equal or greater safety over time.

  The Most Important Rule About Doing Your Taxes

Thirty years ago, Sid, my accountant and surrogate Jewish grandfather, gave me tax advice I’d never forget…

“There are lots of things you can do to reduce your taxes,” he said. “But the one thing you should never do is underreport your income. If the IRS catches you doing that, you’ll go right to jail.”

I repeated that advice several times in essays I wrote (from 2000–2010) for Early to Rise (ETR).

I received a letter from “Jimmy,” a reader of mine who was also an ETR subscriber way back then. He said the IRS was checking him out because of “an unusual ratio of cash versus credit income” on his return.

“Lucky for me,” he wrote, “I’ve been reporting my income in full every year since I read your advice 12 years ago.”

Sid’s advice was sage. With the help of a good professional, you can be “assertive” in claiming expenses without breaking the law. But when you fail to report income, even if it’s a few hundred dollars, you are slapping the face of a 600-pound gorilla. Don’t do it.

Reeves’ Note: Regular Palm Beach readers know that Mark’s wealth-building strategy goes beyond just picking world-dominating stocks. It’s a holistic blueprint of income-producing ideas he’s refined from 30 years of experience.

Over that time, Mark has produced multiple income streams from rental real estate, dividend-producing stocks, non-traditional assets, and off-Wall Street investments.

Now, Mark, Tom and the rest of the PBRG team have packaged their best research services into one product called Infinity. It’s the simplest—and cheapest—way to have all of Mark’s wealth-building ideas at your fingertips.