Being a good investor is not about understanding complex spreadsheets and statistics, however it’s a test of behaviour and emotional discipline. As many investors focus on the spreadsheets, statistics, and forecasts from professionals. History has clearly shown that even the most complex financial models fall short if they ignore the key variable, human behaviour. It’s the most consistent pattern that we can observe, and it won’t make a difference even if we go back a hundred years ago.

Investing is one of the rare fields where someone with little knowledge but a disciplined mindset can outperform even seasoned professionals or someone who is extremely intelligent, who lets emotion drive their decisions.

For example, Issac Newton is undoubtedly one of the smartest men who ever lived, who founded the theory of gravity, laws of motion, calculus, and many more. However, he was also a famously poor investor. In 1720, he bought shares in the South Sea Company. He first doubled the money and regretted selling his shares, buying them back at a huge premium and losing the entirety of his investment.

“I can calculate the motion of heavenly bodies, but not the madness of men.” — Isaac Newton

Similarly, Miyamoto Musashi, who is a legendary Japanese swordsman who mastered the art of controlling his temperament, won over 60 consecutive duels to the death. He emphasized the significance of staying calm while the opponent was consumed by emotion. His victories were not only his skills, but also his ability to maintain clarity and control over his emotions while being under pressure.

“The important thing in strategy is to suppress the enemy’s useful actions but allow his useless actions.” — Miyamoto Musashi

We believe the same principle applies to investing. While it’s extremely hard to predict the next recession consistently or exactly time the market, we can make educated guesses about how markets and people are likely to react to those events. So that we can make adjustments and decisions based on past behavioural patterns in the market, such as greed, fear, optimism, pessimism, and overreaction, as these repeat themselves.

Therefore, our investment philosophy is built around this foundational belief of the market and requires understanding both the analytics as well as the nature of human behaviour.