Michael Mauboussin: How To Build Your Investment Process

Johnny HopkinsMichael Mauboussin1 Comment

During his recent interview on the 20VC Podcast, Michael Mauboussin explained how to build your investment process. Here’s an excerpt from the interview:

Mauboussin: One thing I would just say Harry about building a process is the first thing to think about and think about deeply is actually what you’re trying to do.

How do you think you’re going to achieve some sort of an edge versus other people doing it. And in effect the process you develop should be something that contributes to that source of edge.

So for example in public markets you’d think about the two extremes would be Jim Simons at Renaissance Technology right, tons of technology, very smart people trading very frequently, and on the other side of the continuum would be Warren Buffett who purportedly sits in his office all day and reads and then makes these very few but very consequential investment decisions.

Both of those folks have been very successful over time but their approaches and their processes are very different.

So the key is that there is no one-size-fits-all for process I think but rather that you want to make your process congruent with your perceived source of edge.

And so that to me is sort of the key thing to bear in mind and it’s often one thing people say here’s what I do all day, usually when you’re marketing your fund or something, there’s a little bit of aspirational component to what you say you do.

But the key is to be as congruent… to do actually, to hue as closely as possible to that process in order to achieve the results you pursue.

You can listen to the entire discussion here:

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One Comment on “Michael Mauboussin: How To Build Your Investment Process”

  1. Interesting observations but I don’t think an investor needs an edge. As Einhorn says, with so many market participants moving away from fundamental investing, just being a traditional value investor puts you in a strong position. Just look at the daily news coverage of things like Crypto, gold, ESG, sustainability, dividends and technical analysis and it is easy to see how many people are swamped with all this nonsense. I agree with “the first thing to think about deeply is actually what you’re trying to do” that is missing from a lot of people’s process including advisors and portfolio managers. I do use technology for screening and downloading data, but it is to assist with identifying opportunities that fit my key criteria that is fundamental but with a forward outlook.

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