It's really hard to beat the market. So much so that 85% of actively-managed mutual finds underperformed the benchmark S&P 500 index in 2021. However, that's changing in 2022. When the broad market itself is down 20%, it's easier to beat it, and as of the middle of this year, 49% of large-cap domestic funds were, in fact, beating the market.

As a general rule, the market rises over time. Out of the past 50 years, there were only 10 when the market ended lower than where it started. If you leave your money in an index fund over time, those funds are likely to outperform actively-managed funds, despite the years when actively-managed funds do outperform. And even in their best years, nearly half are still losing to the market.

If you pick stocks on your own, it pays -- literally -- to take a page from Warren Buffett's playbook, since he's one of the few people with a track record for beating the market. Buffett himself advises individual investors to invest in index funds, and his holding company, Berkshire Hathaway, has a position in one. But most of his equity positions are in individual stocks. There are four goals Buffett has for his own company, and they can help you become a better investor too.

1. Protecting the rock-solid balance sheet

The key to a long-term viable business is a strong -- or what Buffett calls a "Gibraltar-like" -- balance sheet. He says it should have "huge amounts of excess liquidity, near-term obligations that are modest, and dozens of sources of earnings and cash." Having excess cash on hand means not having to worry about the bad times when expenses or interest rates may be rising, driving up the cost of doing business. And there will always be bad times as we're seeing in 2022.

Coca-Cola is an excellent example of a company that has easily weathered bad times with strong cash generation. History is replete with companies that focused on growth while burning through cash and are no longer around to tell the tale. 

2. Widening the moat

Buffett aims to widen what he describes as "durable competitive advantages." These set companies apart from others and can come in many different forms, but they need to be sustainable long term, or they aren't really moats. Other companies will find areas of weakness and chisel into them. A great example is Costco, which has competitive advantages in its warehouse membership model, the strength of its brand, and massive scale. There's also Visa or Mastercard, two companies with global payments networks benefiting from unmatched name recognition and network effects. There may be challengers, but none have reached the level of these industry leaders.

3. Developing a variety of earnings streams

Having varied earnings streams protects the company when the chips are down and boosts it when the market environment is strong. Amazon illustrates this well. It has leveraged its core retail e-commerce segment to successfully develop important new businesses such as Amazon Web Services, which has become the company's biggest growth driver and the source of most of its operating income.

Tying back into No. 1 above -- a rock-solid balance sheet allows companies to more easily pursue new opportunities or expansion. In turn, the resulting new businesses or markets contribute additional revenue streams that feed into the cash generation cycle. 

4. Nurturing management

Have you ever noticed that at certain companies, management changes are almost glossed over, while at others, they're seen as a signal to dump the stock? When companies develop and nurture management, handing over the reins goes smoothly and is little cause for concern among shareholders. Take Amazon again. When a founder-CEO leaves a company, investors often get nervous. But Jeff Bezos turned the CEO role over to Andy Jassy, who has been with Amazon for decades and was seen for a long time as Bezos' possible successor. As a result, shares of Amazon jumped following the official leadership hand-off.

Buffett says he uses these goals to guide his company in "good years and bad."  Since this looks like a "bad" year, they can be helpful to investors as they navigate a tricky market.