“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

~ Albert Einstein

Investment Philosophy

Investing can be approached in many ways and across diverse asset classes, with multiple paths leading to success. Choosing a style that aligns with one’s personality is key. Personally, I find investing in stocks most effective. When I buy a share, I view it as part ownership in a company. My ideal holding period is “forever” because the true power of investing lies in exponential growth. Therefore, I seek companies that can grow their intrinsic value exponentially over time. I believe intrinsic value is a function of all future free cash flows available to shareholders, discounted to their present value (DCF). However, I see DCF as a theoretical tool; in practice, too many assumptions and variables are uncertain. A wise man once said: “It’s better to be roughly right than precisely wrong”.

Companies are complex organisms made up of people, each with a unique culture that shapes its operations. I look for companies with a culture that fosters good outcomes. Although difficult to quantify, a strong culture is often recognizable by qualities such as passion and pride. This is evident in customer interactions, product quality, and employee enthusiasm. Such companies are often founder-led, family-owned, or have high insider ownership. They also tend to be unique and hard to replicate, providing a competitive advantage.

Even if you find an exceptional company, the price you pay directly impacts your future returns—the higher the price, the lower the expected return, and vice versa. Ben Graham offers a valuable analogy in The Intelligent Investor, depicting the stock market as Mr. Market, a character who offers to buy or sell stocks at prices that fluctuate with his mood swings. Mr. Market is not a source of advice but rather an opportunity to benefit from his occasional irrational offers. It’s up to investors to ignore his moods and engage only when his offers are rational and advantageous.

The investor’s greatest adversary lies within – their own psychology. Markets are driven by fear and euphoria, and those who fail to master their emotions become victims of their own impulses. While technical knowledge is crucial, equally important is acknowledging what we don’t know. The successful investor cultivates both humility and prudence, understanding that their knowledge has boundaries.

It’s essential to embrace the inevitability of setbacks. As investor François Rochon wisely observes in his ‘Rule of Three’: The market will decline by at least 10% in one of every three years. One in three stock selections will disappoint. And in one year out of three, we will lag behind the benchmark index.

This reality isn’t a sign of failure, but rather the natural rhythm of investing. By accepting these truths and preparing for them mentally, we can make more rational decisions when challenges arise.

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