On... my 4 Pillars of Investing

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“If investing were all about math, mathematicians would be rich. If it were all about history, historians would be rich. If it were all about economics, economists would be rich. If it were all about psychology, psychologists would be rich.” - Morgan Housel. So what is investing about then? I think its about these:-    


Financial analysis. Accounting is the language of business  and investing is the art of picking and buying businesses. If you want to buy something at the shop, you would want to know how much it is worth before parting with your hard earned cash. The same goes for buying a business, before putting your money in - you better know what its worth.


Behavioral finance. To be a successful investor you need to be able to control your emotions - Patience and indifference is key. Be patient when waiting for your opportunities, and be patient to let your thesis play out. Be indifferent to your results (Profit or Loss), and follow your strategy consistently.      


Strategy. You have to develop good risk management and capital allocation. 2 people can be investing in the same stock but because they differ in the strategy on when and how much they invest on that stock, the results can be very different.


Luck. Don’t underestimate the role of luck or randomness. In investing, you can do all the wrong things and end up with good results and do all the right things and end up with bad results. But is luck something you can control? Maybe, maybe not. But when luck is on your side - bet heavily.


I think if you are equally good at analyzing businesses, can control your emotions, have a clear strategy and is lucky (or not extremely unlucky at least), you should do well in the world of investing. You’re the multiplication of your weakest link and anything multiplied by zero is zero. So, it pays to work on each pillar to develop a strong foundation and you should be on your way.

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