Happy New Year! I hope 2023 is a fantastic year for you and you reach your goals!
When I was studying to get my CFP®, we had a guest speaker named Saundra Davis. She is a bit of a thought leader in the Financial Planning world. She gave a very inspiring talk to a group of aspiring planners, myself included. One thing that she said (this quote is from memory, so it may not be precisely a word-for-word copy) that I will remember:
“Don’t let anyone tell you that you can’t do it your way. Except for the bounds of legality and ethics, there are no rules for how you do your work. You will get feedback - you should work for a bank, you should work for a broker, you should do this or that. Ignore it. Do it your way. Heck, I’m a financial advisor for people with no money. If I can make it work, anyone can.”
I was already pondering starting my own firm. Her talk solidified that path for me.
Saundra was talking about the Finacial Planning profession, but her words apply equally well to investing. As you learn about investing, you will try different techniques, strategies, and types of analysis. Some will stick, and some won’t. And that’s fine. Not every investing style is appropriate for every person. Part of running your own race is deciding what works for you and what you can rely on.
Maybe you are super hyper and can’t sit still, so waiting for long-term investments to pay out sounds like an extended trip to the dentist. Maybe options would be an excellent strategy for you. Or perhaps you are a lawyer with training in deciphering obscure legal documents, so reading about companies in special situations like bankruptcy or litigation is right in your wheel hose. If you have a technical background, perhaps delving into the intricacies of SaaS models and technical advantages is more your thing.
You will probably find that it is more than just what your training or profession lends itself to and will also encompass more about who you are. One of the reasons I find investing so fascinating is the whole “building a process that matches me as a person.” By way of example, I will share some of the nuances of how I’ve tailored my approach to my life and personality:
Limited Time: Investing is not my full-time job. It is more of a very time-consuming vocation. I do it mainly for the love of the game. But I have always been otherwise employed. First at a demanding corporate job, later running my planning firm. This has led me to develop a strategy that is both focused on the long term and allows me to step away from focusing on investing for an extended time when I need to. Previously, I spent much time on special situations like merger arbitrage or post-bankruptcy companies (I blame Greenblatt). But I found that “babysitting” positions like that required too high of an in-the-moment time commitment. So I don’t do much special-situation investing anymore.
Limited Research: I like to research new companies. I find it interesting to read about new businesses and industries. I like learning about how companies work and how they fit in an industry with other companies and customers. But my diligence has always been limited. Many investors know their companies and industries far better than I do. When I talk to friends and relatives about companies that I know or follow, they are baffled that I know some obscure businesses. When they ask how I learned about it, I usually respond, “by reading.” But my diligence is far short of what a typical hedge fund or professional analyst would do. Primarily because of the time limitation mentioned above, but also an innate personality trait, I generally don’t do the exhaustive diligence required at the professional investor level. Recognizing this personal limitation, I have adopted a technique of buying small amounts of companies that I am researching. I tend to do better at consistent analysis after owning a company. Also, watching what they do over time helps me learn my positions better. I tell people that I don’t know my investments until I have owned them for a couple of years. But many professional investors might scorn the “starter position” mentality and only enter a position after deep due diligence.
Personality Quirks: I’m a little OCD about certain things. Like being on time. That may sound like a good thing, but if we need to be somewhere at a certain time, my family will attest that I am not the easiest person to be around. And if we have to fly, forget about it. I’m just a mess. I can’t relax until we are safely at the gate. This is one of the reasons that I stay away from short-term investing strategies like options. If something has a deadline to it, I am useless. A .1% portfolio position in an option will keep me up at night. I will check it multiple times a day, herniating over whether I should sell as the clock ticks down to expiration. It’s just not for me. This is just another reason I have gravitated to companies I can own for extended periods.
These types of nuances have taken me years to figure out. And they will likely change over time. Maybe once my kids are older and I retire, I will have more time to research and do deeper due diligence. Perhaps I will master my OCD punctuality through transcendental meditation and psychedelic micro-dosing so that I can adopt different strategies in my investing repertoire. One thing that I’m sure of, things will change over time.
I’m hoping that you are successful in running your own race. Remember, outside of legalities and ethics, you can do it any way you want…
Running Your Own Race
Thank you Brian. As always know thy self :)
Loved the quote by the speaker that you shared in the beginning and it really speaks to me as not being from finance world and trying to get my foot in one, I’m doing it my way long and (at time it seems useless) I’m doing it my way that gives me satisfaction (although I feel like that’s a wrong word)
I always did things my way not because it’s the better way but because no one ever thought me of “the proper way” and so I had to do with what I had
Again thank you for sharing 🙏