Philosophy

Any investor has a choice of either managing their portfolio themselves or finding a third party service provider. Whatever route taken the aim is to achieve consistent out-performance.

Achieving consistent out-performance in not only very difficult but requires dedication and skill. Saying this, the following general principles have helped guide my over-all approach to achieve this goal:

  • The investor rather than the market determines long term performance. The performance of any investor is determined by the skill, discipline and technique of the investor, rather than the market conditions in which they operate. Therefore, an investor should always shrive to improve and take practical steps to achieve this.
  • Play a great defense. Investing is much more about playing a great defense than playing a great offence. An investor is better served by focusing on potential losses rather than dreaming of possible returns. Personally, when selecting investments I apply the simple rule that under no (reasonable) scenarios do I expect to lose money over a subsequent period of three years.
  • Be highly selective in the selection of investment ideas. In particular, investments should be selected in accordance with the strengths of the particular opportunity not because it forms part of an index or fits in well with a particular strategy.
  • Consistent out-performance requires a competitive edge. Put another way, it is better to be an expert is something than a generalist in everything. Know what your strengths our and tailor your investment process to maximize these innate advantages.
  • Business fundamentals ultimately drive asset prices. Studying company reports, the dynamics and drivers of the underlying business activities, geopolitical/macro/monetary factors, industry specific shifts and technology advances, primarily from source data/reports, should be the mainstay of an investor’s activity.
  • Only buy at the right price. By only being prepared to enter investments at opportune levels (which I take to be 25% under my evaluation of fair value) not only increases the future expected returns but reduces the downside potential. In short, I would rather miss investment opportunities than expose myself to situations where the odds are not very heavily stacked in my favor.