BUT WHAT DO I KNOW?

This is the beginning of the almanac series. The series begins and ends with humility because nothing is more humbling than investing.

I have been in the “investment” space for several years now, but I continue to consider myself a novice. Not a day goes by that I don’t learn something new. The problem is that I haven’t taken the time to write down and share the lessons learned, robbing myself of the valuable distillation of my thoughts and ideas. How vain - you thought this was about you… HA! 

All jokes aside, I’m glad to share what I learn with you. For starters, people mean different things when they talk about investing. I’ll be very explicit; investing is the act of purchasing all or part of an asset, with the expectation of receiving a proportional share in the earnings of that asset. I’m careful with my language because I tend to be wrong more than I’m right, and at some point I will likely discuss a really cool investment opportunity that does not meet that definition. 

The bane of all investing is the ‘speculative bug’ that bites us all, just as we start to feel like we are smart - infecting us with its humbling venom. In direct contrast to investing, speculation is the act of purchasing all or part of an asset, with the expectation of selling it at a higher price in the future. 

Everyone has a preference, and many have become wealthy from both approaches. My preference is for investing. The risks are lower, and so is the stress. Investing is the ‘get rich slow’ approach. You’re sure to get there, but it takes time. As Warren Buffet says “you can’t have a baby in one month by getting 9 women pregnant.” 

That is the end of what I KNOW. Now for what I THINK. 

I think that the key to successful investing is a thorough understanding of business principles and using that understanding to analyze potential investments. Paradoxically, I believe the best way to understand business is through the analysis of potential investments. Thus the flywheel of investing; analyzing business leads to better understanding of business principles, while a better understanding of business principles leads to a deeper analysis of business. I use the word ‘business’ but it should be noted that fundamental principles apply to all forms of income earning assets: real estate, private businesses, individual stocks, etc. 

My hypothesis is this: over time, a better understanding of business should correlate with better investment decisions. As I come across new interesting business lessons, I will share them with you using the source of the idea as an example. Maybe we can all become smarter together. If not, at least you will get some great material to put you to sleep at night. 

I look forward to sharing my findings with you soon! 

Cheers, 

B.