Investing broadly consists of three key pillars or steps-
Among these three, Research is the easiest aspect to learn & practice in the sense that it is the most structured and scientific aspect in Investing.
Research is pretty straight forward; you read, gather information, do some number crunching and come to some data & information backed conclusions.
It is a relatively process oriented part wherein investors can really benefit from the work done by other investors including in terms of learning how to do research.
The 2nd aspect is Decision making. Decision making involves reflecting on the conclusions of research and coming to various decisions of whether to buy, hold, sell or avoid a stock including how much to allocate.
Decision making is different from Research in the sense that it is more of an art than a scientific process and there is no step-by-step structured process to do it.
Decision making is where experience & feedback loop plays the biggest role. Overtime as one continues to make decisions and have a feedback loop wherein you reflect on your past decisions to understand what works & what does not, then overtime one will become better at it.
Frameworks and mental models built overtime with experience does help structuring this part a bit.
This is where the biggest differentiator of edge lies in investing.
The 3rd aspect is Discovery which is your screening process. And by screening I don’t mean knowing stock names, that is something everyone knows; real screening involves getting an initial sense of what is happening in the company which makes it worth moving to the Research process.
Screening is the most unstructured part of investing process; it is more like a treasure hunt. If you are too particular in terms of what you look for during screening then your net or say the coverage area would be too narrow and thus you might miss out on a lot of opportunities whereas if your net is too wide then it becomes more & more unstructured & like a treasure hunt.
But Discovery is also the most important aspect of the 3 pillars given that it is where the whole investing process starts from; if an investor is not able to discovery good opportunities in the first place then no matter how good they are in research & decision making, the overall outcomes would never be good enough.
Discovery could be the key reason for missing out on some of the biggest winners given that you might never discover them in the first place or early on.
The biggest edge here comes from having a network of good investors and/or keeping a close watch on what some of the best investors are looking at or investing in.
So, in summary;
Few other blogs around improving as an investor that we have written in the past-
Shared Research Reports 🔗 https://www.surgecapital.in/sharedresearch
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