Investment Philosophies: Successful Strategies and the Investors Who Made Them Work, 2nd Edition

CHAPTER 14

A Road Map to Choosing an Investment Philosophy

If the purpose of this book is to provide you with the tools to pick an investment philosophy, you may very well feel that it has failed. After all, there seems to be both good and bad in every philosophy and no one philosophy seems to dominate over time and yield consistent winners. What purpose has been served, you may wonder, from this examination of diverse and contradictory views of how markets work and fail to work? In this chapter, we hope to not only wrap up loose ends but also bring the process of picking a philosophy back to you as an investor.

A SELF-ASSESSMENT

As we noted in Chapter 1, there is no one investment philosophy that is best suited for all investors, and much of what we have said in the intervening chapters reinforces this point. A strategy that works for an investor who is patient and has substantial capital to invest may not work for an investor with unpredictable cash needs and a smaller portfolio. In this section, we consider three aspects that will help determine your investment philosophy: your personal characteristics as an individual, your financial standing, and the beliefs you have formed about markets.

Personal Characteristics

Investors who pick investment philosophies that do not fit their personalities are destined to abandon them sooner rather than later, weighed down not just by the fact that they do not work for them but by personal discomfort with the vagaries of their portfolios. ...