Value Investing: Tools and Techniques for Intelligent Investment

Chapter 15. The Tao of Investing: The Ten Tenets of My Investment Creed^[15]

Many times over the years I have been asked how I would approach investing. This chapter attempts to codify my beliefs (and provide some evidence for them). However, before embarking upon a journey into my investment creed, it is worth-while asking a question that doesn't get asked often enough – What is the aim of investing? The answer to this question drives everything that follows. I feel that Sir John Templeton put it best when he said, 'For all long-term investors, there is only one objective – maximum total returns after taxes.' Nothing else matters. Then the question becomes: How should we invest to deliver this objective?

• Tenet I: Value, value, value. Value investing is the only safety first approach I have come across. By putting the margin of safety at the heart of the process, the value approach minimizes the risk of overpaying for the hope of growth.

• Tenet II: Be contrarian. Sir John Templeton observed that 'It is impossible to produce superior performance unless you do something different from the majority'.

• Tenet III: Be patient. Patience is integral to a value approach on many levels, from waiting for the fat pitch, to dealing with the value managers' curse of being too early.

• Tenet IV: Be unconstrained. While pigeon-holing and labelling are fashionable, I am far from convinced that they aid investment. Surely I should be free to exploit value opportunities wherever they may occur.

• Tenet V: Don't ...