1. Knowing What You Dont Know
- It is important to acknowledge that capital market forecasts as a whole are neither consistently actionable nor valuable.
- Maybe Mark Twain put it best: "It aint what you dont know that gets you into trouble. Its what you know for sure that just aint so.
2. Value is the Golden Rule of Investing
- The investment industry perpetuates the myth that there are lots of ways to generate good long term returns, but it is apparent there is only one buying cheap assets.
- Success results not from "buying good things, but rather from "buying things well.
3. Understanding Risk
- Superior investment performance is not the primary goal, but rather superior performance with less than commensurate risk.
- A lack of understanding of uncertainty and its consequences is a big contributor to unfavourable outcomes
4. Playing Not To Lose
- The primary objective is capital preservation via the utilization of a conservative and time proven investment process. There is no need to assume an overly aggressive posture; rather the first priority is to produce consistency, protection of capital, and superior performance in down markets.
- Diversification is used as a defensive tool to avoid dangerous concentration; it is the only free lunch we are afforded in this business. Skillful risk control is the mark of a superior investor.
5. Understand the Cycle
- Markets move cyclically, rising and falling.
- We may never know where we are going, but we should have a good idea where we are.
6. Be a Contrarian
- Refusing to join the herd; investing requires control over psyche and ego.
- Mastery over the human side of investing isnt sufficient for success, but combining it with analytical proficiency can lead to great results.
7. Investment Policy is Important
- A well written investment policy is the linkage between my clients long term investment objectives and my daily work as their portfolio manager.
- If the policy is carefully designed, clients are better able to maintain their commitment through difficult market conditions and therefore have stronger odds of achieving their stated long term investment objectives.
- Given that the asset mix decision will determine a significant portion of future returns; it is essential that ones investment approach be intuitive and adaptive rather than fixed and mechanistic.