Investing is highly personalised

Investing is highly personalized: You pick the businesses amongst the thousands that excite you as long-term owners with the management teams you trust and admire. Personalization allows you the independence of your opinion, and a conviction unperturbed by the public markets.  Personalization allows you to give the business ample time to reach its destination (while being objective enough to assess the challenges it is facing in its long-term prospects). Personalization provides you a filter in the noisy world to retain faith in your conviction of the long-term potential of the business. 

Public markets are an exceptional gift in modern capitalism allowing the best of both worlds: providing opportunity for long-term ownership (if you don’t allow Mr. Market to deter you), while also providing immense flexibility to exit the business if its prospects are severely impaired. Imagine how hard it would be for a business owner in a private capacity to exit a suffering business. However, as everything in life, this gift doesn’t come easy. The public markets will entice you regularly to give up this edge. Vagaries of the prices will distract you, but your personalized approach to investing will allow you to give the company room to perform, the time to flourish and prove your thesis correct.  It may take a bit longer to happen, as all things usually do in real-life, and it will test your patience more than you anticipated, but in the end, the right conviction will win. 

Time is relative, 3 times the return on an investment in 5th year and no returns in first four years is way better mathematically than 15% in each year, but the human mind finds it difficult to face so. If an investor is too much return (yearly IRRs) obsessed, his mindset will suffer. This focus will make his mind to be very unstable, shifting from one company to another, and eventually ending up in lots of unproductive activities. 

A good asset well bought is half the battle. Rest is allowing it time to perform  

The two sides of me 

I consider two sides to my investing. While one side (majority) of me likes to own durable exceptional businesses for long-term (where duration is more important than quantum of rate of returns), the other childlike curious side longs for experimentation, finding newer companies and newer ideas that provides moderate action and newer learnings.

While the ownership of durable long-term compounders is primarily a negative art (of rejecting the majority of the universe and rejecting the activity), the other side of investing embraces novelty and entering unchartered territories to test and learn.

Over time, I have realised that the aim of my investing journey is not to choose one over the other but incorporate both in the right proportions.

There are very very few people capable of sitting and owning companies for long periods without tinkering. The desire to be solely in the first category, while suppressing the second can lead to make terrible long-term mistakes where human desire for novelty (and boredom with the existing) will justify trading newer ideas with the ones you currently hold. One of the most common investing mistakes that the best investors regularly mention is selling a long-held investment to incorporate a newer one and it ended up otherwise.

Relative comparisons amongst good businesses based on mathematical projections is very hard and if one owns one great business with the right prospects, its best left to its own

In fact, I have realized that embracing the novelty of the second can enable you to become better at the first. You can be active and experimental in the right domain, while being extremely patient in the other.

This approach is in sync with the barbell theory (as talked in the Antifragile book by Nassim Taleb). The golden rule as in the barbell theory is to avoid the middle zone of owning mediocre companies (which are neither durable, nor exceptional IRR generators) and not mix the two approaches.

I will finish by saying Investing is highly personalised and it will be done best when you find a style that matches your personality and allows you to get better at your craft for long periods of time. Finding that is a lifelong journey. Evolution of one’s approach and mistakes are to be embraced joyfully.

Akhil D.