My Investment Strategy

The Story

My investment philosophy is to earn a good absolute return, regardless of how the market as a whole is performing, while managing downside risk. This philosophy is implemented through the following:

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Investment Theory #1: Buffett’s Letters

Warren Buffett’s 1957 Letter to Partners

In 1956, Warren Buffett concluded his work for Benjamin Graham and returned to Omaha, where he started an investment partnership. This partnership was formed with seven limited partners, made up of family and friends, contributing $105,000, and Warren Buffet contributing $100.

The partnership, and the ones that would follow, went on to be wildly successful. This series of posts will attempt to understand the principle ideas behind that success.

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Natural Science #1: Newton’s Laws

Physics: Newton’s Laws of motion

Newton’s laws of motion are three physical laws that laid the foundation for what we now call classical mechanics. These laws describe the relationship between a body, forces acting upon it, and its motion in response to those forces. Newton used these laws to explain and investigate the motion of the world around him.

Newton was a true giant of science. Necessity might have even led him to invent modern calculus as a mere detour in his work. Learning about this man is well worth our time.

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History #1: Civilization

Musings on Civilization

Throughout history, there is a recurring narrative regarding the interaction of civilized people and barbaric people. That narrative usually goes something like this, there is a group of uncivilized people, from the forest or the steppe or the mountains, who initially clash with another group of civilized people, from the valleys or cities. Eventually, the uncivilized people realize the benefits of settled agriculture and give up their barbaric ways. This is a narrative about change and progress, as the world continues its march towards a better tomorrow. But is it true?

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Human Nature #1: Association

Psychological Bias: Mere Association

Imagine for a moment you are a child attacked by a dog, or an adult who just got engaged at a certain restaurant. Powerful emotions would be taking hold in both situations, and associations would begin to form. In the case of the child, they may forever associate dogs with fear. In the case of the adult, they may forever associate that restaurant with joy. That process of association can have powerful consequences on a persons judgement.

Let’s see if we can better understand how association comes to affect our lives.

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Numeracy #1: Bayes Theorem

Bayes Theorem

Thomas Bayes was an English statistician, philosopher, and Presbyterian minister who is known for having formulated the theorem that bears his name. Bayes Theorem originated as Bayes’ answer to the inverse probability question. Normal probability states, given a certain number of white and black balls, what is the probability of drawing a certain color ball. Inverse probability states, given that you drew a certain color ball, what can be said about the original make up of white and black balls.

Instead of focusing on the formula ( P(event|newinfo) = P(newinfo|event) * P(event) / P(newinfo) ), let’s focus on understanding the deeper concepts behind Bayesian thinking.

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The beginning

“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts. Slug it out one inch at a time, day by day. At the end of the day – if you live long enough – most people get what they deserve.” – Charlie Munger

“Each day acquire something that will fortify you against poverty, against death, indeed against other misfortunes as well; and after you have run over many thoughts, select one to be thoroughly digested that day.” -Seneca

Follow along on my daily journey to become wiser. The road taken will focus on security analysis but there will also be detours into the worlds of math, programming, human nature, physics, nature, history, and economics.

My goal is to realize my potential and help others do the same. Hope you enjoy.