Simple beats clever
A complicated investment process is not a more sophisticated one. Discipline is easier to hold when it is simple, and simplicity is what survives the years when conviction is tested.
There is a persistent belief in markets that a more complicated process must be a more sophisticated one. In practice the opposite is usually true. The philosophy that survives twenty years is the one simple enough to hold on the worst day, not the one with the most moving parts.
Complexity is often a hiding place
A process with many steps, many screens and many overrides feels rigorous. Often it is a way of avoiding the one hard judgement at the centre: is this a good business, run by good people, at a sensible price? When the extra machinery cannot answer that question, it is decoration.
Simple rules survive stress
Under pressure - a falling market, a bad quarter, a position that has gone nowhere for two years - complicated frameworks get abandoned. Simple ones get followed, because you can still remember them and still believe them. A discipline you cannot execute when frightened is not a discipline.
Simple is not easy
Understanding a business deeply, insisting on quality, judging management honestly and waiting years for the thesis to play out - none of that is easy. It is just simple to describe. The difficulty in investing was never the complexity of the rules; it was the consistency of applying them.
Got a question on what you have just read - on bottom-up research, quality investing, or the Category III AIF structure? Write directly to the office. These essays are general views only, not investment advice.
A research-led equity investor with over twenty years in the Indian markets. Designated Partner of Stonebridge Advisors LLP, Investment Manager of Anchor Rock Investment Fund - I, a SEBI-registered Category III AIF.