Portfolio allocation, page-33

Hi @hcosah

Over the long term my approach has probably aligned well with what @travelightor has expressed above. These are principles that I might describe as 'Buffett' principles (apologies to @travelightor if I'm over simplifying). These principles are important (in my mind), not because of who uttered them (though I'm sure that helps, if I'm honest), but because they speak of certain fundamental & timeless truths that resonate deeply with me.

So whilst I don't think I will ever jettison these, I believe I have evolved over the last few years. I have come to believe that it is of value (even if perhaps not essential) for an investor to think about how other investors are behaving. I think 'Buffett investing' has become so popular that it's become a crowded hunting ground. That said, I still think over the very long term, one can prosper without worrying too much about this, as the 'crowd' can always be expected to move on to the next thing (eventually), and the fundamental truths of the 'Bufffett' approach will always be there (I suspect).

One of the main consequences of all of this, has been that I think more about the fact that just because something is not of sufficient conviction to merit a 20%, or 15% or even a 10% allocation, does not mean it doesn't merit a 5% or a 2.5% allocation. If the crowd is eschewing low-conviction, then there is a good chance there is value in a low conviction opportunity. Something can have a reasonable risk of going to zero, but still be a very worthy investment. It's not how one's individual picks perform that matter, it's how the portfolio performs that matters.

Long and the short, I think pondering market psychology and macro economics (basic though it is, for me), has probably made me a better investor (time will tell). I also think it helped me in the latest crisis (this may be a personal thing).

Bill Ackman recently said "Engrave Your Investment Principles In Stone And Stick To Them". I completely disagree. I have come to believe increasingly, that mental flexibility and adaptability are paramount (even more important than process). Buffett has always adapted to suit his circumstances (especially his size), and has said that he progressed from being 100% Graham to being Graham/Fisher. Ultimately it is always about staying true to sound principles - and what rings true to you as an individual investor.

Something that has also being evolving for me, is that I have been trying to reduce complexity (as a work in progress for me). I completely agree with @travelightor's comments on this.

What have I learnt in the last 6 months? I sense (though I may be wrong) that my learnings about market psychology and market-liquidity ('macro') probably assisted me in the period (even if just to calm my nerves). But most particularly, what I have re-learnt is that when there is panic, you have to force yourself to buy. Some understanding of market psychology and how it affects stock supply and demand, helps in this regard, I think.

All of that said, if I had to engrave one idea into my mind, about how to think about 'stocks', this would be it (I think it would avoid a lot of anguish, headache and complexity):
Buy a stock as if you were buying your cousin's corner shop, or your brother's laundromat.

I'm not sure if this is the sort of response you were expecting. Feel free to prompt me further (if you think I have anything of value to say).