Beating the market by this much over two full decades puts Pabrai in special company. What has set him apart from the crowd is that he runs a concentrated portfolio. He holds few positions, and he invests only when he has extremely high conviction. When he does invest, he invests a meaningful amount. Because Pabrai owns only a small number of positions at any given time, he can't afford to make major mistakes. After all, one big error would ruin his overall performance. Clearly, given his spectacular long-term track record, he has done a great job of avoiding mistakes while still finding big winners. His success can be attributed to a special formula... Heads "I Win," Tails "I Don't Lose Much" Pabrai's formula is all about protecting your downside while also getting exposure to big winners. Pabrai likens this strategy to a coin flip. He wants every investment to produce one of two results... Result No. 1: The coin comes up heads = Pabrai wins big. Result No. 2: The coin comes up tails = Pabrai breaks even or doesn't lose much. The formula is beautifully simple... and incredibly successful. Pabrai wants only investments that offer asymmetric opportunities. If an investment works out as planned, Pabrai gets a big win. If it doesn't, his worst-case scenario is that he still breaks even. He wants every investment that he enters to be low-risk and high-reward. As a result, he has massively outperformed the market. Not every investment is a giant success, but no investment is a major flop. While Pabrai's formula is simple, putting it to work is harder. It requires discipline. You must be willing to say "no thanks" to stocks that tempt you but carry too much risk. The good news is that discipline is something anyone can have... All you have to do is keep Pabrai's formula at the front of your mind every time you consider buying a stock. Now, I don't recommend that you replicate Pabrai's concentrated investing style. In fact, I strongly believe in the power of diversification. But I do recommend that you adopt his coin-flip investing mindset. Doing so will improve the quality of investments that make it into your portfolio. That means more home runs and fewer strikeouts. An Entire Sector Pabrai Would Like While the tech sector has boomed this year, I believe there are much more compelling areas of the market to put new money to work. Next week, I'm going to introduce you to one sector that I believe offers the kind of low-risk, high-reward opportunity that Pabrai's formula seeks out. Until then... Good investing, Jody | 
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