I Believe... an Investing Thesis
Develop your investing thesis before you allocate capital. Revisit it often. Convince and re-convince that, either you are on the right track or need re-revision.
I encorage people who don’t agree with my thesis to discuss topics other than markets and investing.
Before managing your own investments, determine some declarative statements about realistic goals, what you will do, won’t do and general beliefs about market conditions. Return to this statement every few weeks (if not more often) to determine if it still holds true, or requires revision. A few disclaimers. My comments aren’t in any particular order other than the timeframe they arrived from my head to paper. I encorage people who don’t agree with my thesis to discuss topics other than markets and investing. Without further adieu:
Learn to understand the difference between price and value. Improving your opinion of value will lead to sound decisions. The difference between current price and your opinion of value is a trivial calculation.
Be “stochastic” (diverse) in your quantitative evaluation metrics. Seek to develop more than one model or opion (or analyst opinion) of an assets price. 100% of your models will be wrong. Hopefully, many of them will be valuable.
Technical analysis and fundamental analysis are both models described in #2.
Governments/banks are faced with life and death decisions. They will act to preserve themselves. Position accordingly. Inflation will continue to be high. Globalism will splinter. Security energy and their ability to maintain entitlements is the key to their survival.
Markets are not your friends. They will take all the money your emotions give them access to.
Hold enough cash to take advantage of lower prices. Precious metals and quality foreign currencies (of which only the Swiss Franc comes to mind) are cash.
All investments/liquid capital involve a measure of risk vs reward. Seek convexity, while not exceeding the amount of risk you are comfortable with.
Almost all of your market ideas are the propaganda of someone else. Treat them like agents of espionage, not the innovation of your own mind.
Document gains AND losses.
Carve your portfolio in to traunch sizes (like pie). Determine maximum and minimum allocation appropriate for the risk of an investment. If any investment keeps you awake at night, you are likely over weight.
Do not invest in more assets than you can devote a hour a month to. At least 1 hour a quarter for small traunches.
Check investment thesis regularly. Ask, "has something changed?"
Use a price appraisal to value your entire book. If you purchase a stock for $10 and have credible appraisal of $20. Its near term drop to $5 will not cause you to lose sleep so long as the fundamentals haven’t changed.
Avoid extreme concavity for the sake of secure investment symmetry. Don’t try to pick up pennies in front of a steamroller. That which can kill you, eventially will.
Markets reward patience. Be more patient than you think you need to be. Don't over deploy cash you need in the near term.
Curb your greed. Greed is actually an emotion. Emotions will destroy your accounts.
Develop a discipline and stick to it. Modern market tracking tools are designed to keep you preoccupied with following daily results (price). They are generally free, because they are designed to reallocate your money to the broker and the market. Daily change is irrelevant in a 2-5 year time horizon. Don't get swept up.
DON’T USE LEVERAGE!!!
Back test ideas, especially complex trade setups.
Never push all in. Establish a portfolio target and sprinkle in for value. Dollar cost average in. Perfect the eye for support and resistance… oversold and overbought indicators.
In 2024 real assets will prevail over financial ones. Portability and liquidity take priority. Energy, land and commodity inputs are highest value and real wealth.
Macro-economic conditions have made us all traders and speculators. There is some price which everything is for sale. Don't get married to your investments.
Investment advice is worth roughly what you pay for it (that includes your time invested).
Set exit targets the way that you set entry ones, FAR IN ADVANCE. Once price is moving in your direction emotions take over. Follow and execute your plan.
Seek confluence, not certainty. No idea can be proven affirmatively. Falsifying every critique moves us one asymptotic step closer.
Read the investors “starter pack”:
The Most Important Thing - Contrarian investing, market psycology
The Intelligent Investor - Fundamental Analysis
Secrets to Profiting From Bull and Bear Markets - 4 Stage Technical Analysis
Technical Analysis of The Financial Markets - Classical TA