Just finished rewatching all 95 episodes of The Romance of The Three Kingdoms – Although this is a classic Chinese historical war movie that is likely dramatized, there are a lot of lessons to be learned from it – for value investing purposes.

Here are 5 investing lessons I learned from watching The Three Kingdoms:

[1] No matter how good we are or how much money we have, we should only act when it is right to act, we should think of a few steps down the road. In the movie, Zhuge Liang said that to be a good commander, they cannot go against heaven’s will in war, and therefore, he often uses nature’s advantage to win the war. In investing, we should only buy when it is right to buy and sell only when it is right to sell.

[2] In the movie, how Cao Cao defeated Yuan Shao was that he has been preparing for that particular war for decades. In investing, we need to study, do the homework in waiting for the day where we buy and when we sell our stocks, we have to be patient.

[3] Arrogance kills. In the movie, many great people are killed because they were too arrogant, such as Guan Yu, Ma Su, and Liu Bei. In investing, it is the same, we have to be wary of arrogance especially when our stock portfolio or stock is up a lot – we cannot expect it to always be up – when it is the right time to start selling, we should. Being cautious should always come first, just like Zhuge Liang character in the movie.

[4] Preparation is vital. In the movie, how Zhuge Liang wins battles is that he always studies his opponent very well, and he knows his troops and cities very well too. In investing, we need to understand the company we invest in, the business model and the market well. That way, we can have a higher probability of making money over the long run.

[5] Knowing when to retreat. In the movie, after Zhuge Liang death, he instructed all the troops to retreat back to Shu Han and by doing that, it gives Shu Han at least another 20+ years of prosperity before Sima Zhao invaded and Liu Shan surrendered. In value investing, we need to admit our mistakes and retreat when we know we cannot possibly make money from that particular investment.

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