Wednesday, October 19, 2016

The struggle with style


Figure hunched by David Rosen

I'm struggling to some extent with my investing style. I can't make up my mind on what my style actually is.

The thing is, every investment guru out there has a different style, and they all think, or at least say, that their style is the best and "you should do it like this also!". There's indexers and stock pickers. Technical analysis and fundamental analysis and quantitative methods. Value and growth and dividend investors. Market timers and dollar-cost-averagers. Event waiters, contrarians, patient money and traders. Allocators and robo-advisors. And so on.

And many of the gurus make a compelling case for their particular style of investing. I have not locked down a single style for myself but my portfolio is more of a collection of different approaches. A more cordial person could call it a "core and satellites" method. Someone less eloquent might call it a mess.

Some time ago, maybe two years back, I wrote a short investment plan for myself but haven't really looked at it since. I should probably return to the subject and try to define my methodology better. And then stick to it ;P

I recently came across a brilliant interview by Charlie Munger, Warren Buffett's "wing man" for decades. I hope I'll some day reach the same level of clarity :) The whole interview is pure gold but his and Warren's investing style is described at 5:58.


His four criteria are such gold I'll add a transcript of what he says here:
"1. We have to deal in things that we’re capable of understanding,
2. Once we’re over that filter, we have to have a business with some intrinsic characteristics that give it a durable competitive advantage,
3. Then of course, we would vastly prefer a management in place with a lot of integrity and talent,
4. And finally, no matter how wonderful it is, it’s not worth an infinite price. So we have to have a price that makes sense and gives a margin of safety, given the natural vicissitudes of life.
That’s a very simple set of ideas."

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