Mise en PlaceRujuta Tamhankar
This culinary French term translates to everything in its place. Cooking and investing are process-driven activities where greater outcomes can be attained by preparing ahead of time. Growing a Data Base of Companies is Mise en place. Before taking a position in a company, the individual has time to prepare, is relatively stress-free and there is no pressure to act.
Mise en Place and Investing a.k.a Why Process Matters
Failing to prepare when allocating capital can lead to less than satisfactory results and frantic decision-making. Having a well-defined process can take a great deal of the stress out of decision-making. The process of investing boils down to:
- Understand what type of investor you want to be: Whether it is outstripping an index, achieving optimized performance, compounding whilst avoiding capital loss, or trade for residual income.
- Understand how you want to manifest that investor type: How concentrated the position should be? What investing style best suits your personality? What portfolio turnover are you comfortable with?
- Define what opportunities you seek: look for market leaders with a low likelihood of moat erosion, future market leaders with competitive advantages.
- Write it down: investment policy statement can be invaluable during times of volatility or uncertainty.
- When you have that down, you can more readily identify companies that fit within your investing universe. At this stage, the cooking process has still not begun.
Flow State and how does one achieve a flow state in investing?
A flow state is a state of deep focus, devoid of distraction when an individual is carrying out a task. The decision-making process can become a great deal more frictionless when the investor knows what they intend to do under certain circumstances. After establishing your process for investing, and deciding how you wish to undertake the construction of a portfolio, the next step is to discover the companies that will populate it. Assuming you have discovered a company, and it fits your criteria, it’s important to understand what you might do if things don’t go your way, ahead of time. Extracting the emotion from the investment equation is hard. Outlining a list of reasons that would allow you to sell a position can benefit you as it allows you to remember why you are invested, and why you would sell, and when those events happen, the activity doesn’t require extensive pondering over what to do. Whether that means selling once a certain IRR has been achieved or when there are signs of managerial deterioration, accounting irregularities, thesis creep, or some other red flag factor in the business, you are acting on a pre-defined catalog of responses.
The best antidote is simply knowing what you own, knowing why you own it, and knowing what would have to occur to make you lose conviction. Preparation, when pressure is low, is a critical ingredient to ensuring that an investor can more readily focus on the task at hand when the act of investing becomes live. Flow states are impeded by distraction. The contemplation of appropriate response is a distraction best remedied by proactively establishing your catalog of responses, ahead of time. As Ramsay suggests, “time spent getting yourself ready is never wasted”.
Source: – Everything in it’s place by Conor MacNeil
Asset Multiplier Comments
- It’s all about doing the job ahead of time rather than catching up as needed.
- This is all about preparation before investing, which includes building company data bases. Maintaining data bases allows you to track the ongoing performance of your company. Based on the information acquired, the performances being tracked serve to indicate where a firm is presently and where the business will be in the future. Understanding what you have results in conviction. It’s a cycle in which everything boils down to planning.
- The advantages of planning ahead of time are self-evident. Faster decision-making processes, as a result of preparation, can save us a significant amount of time when making decisions.
- An investment policy statement serves as a guide for portfolio building and proper monitoring. Assist to enhance focus on the investment objective and preventing mistakes caused by changing market conditions, which is a vital component in investing.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”