In the last post, I wrote about three stages of an investor – The Beginner, Novice and Expert.

In the initial years as you learn, you will find books and courses to guide you through this evolution. After 8-10 years of this journey, if you are still investing actively and more importantly learning, you won’t find a nicely packaged curriculum to progress further

In college our learning is structured and guided by others. As an early expert – someone who knows a lot, you are now on your own and that is disorienting.

It is tempting to read more books, hoping to learn but you realize that you have reached the point of diminishing returns. You look for gurus, but soon realize that they are no different, though some sound confident online. Often these gurus are performing no better than you and make similar mistakes

Finally, the handful of super-investors who can teach you something are not accessible.

You have to develop your own learning process. There are no pre-defined guidebooks to do that, but some approaches which I will share with you

Mistakes as your guide

One of the most powerful ways to learn at this stage is reflecting on your process and mistakes. Let me explain

Once you have learnt the basics and become proficient, it’s time to start documenting your process and decision making. Write down the thesis, valuation estimate, your entry criteria, position sizing and so on. Finally, when you exit the position, review what happened versus what you expected

Reflect on what went wrong, what you got right and what you missed. Go back to your process and refine it. You have to keep doing this to keep learning

Teach others

The other well known way to learn is to teach others. Write about it, make online videos or take classes for other investors

When you make your knowledge explicit, you teach others as much as you teach yourself. You find gaps in your knowledge and can fill those gaps

I accidentally stumbled into this through my blog and have been learning/teaching others for 20 years. My plan is to expand this further

Jump boundaries

I realized this aspect of learning in 2019 when I found gaps in my understanding of the market and was unable to explain some of my failures. As I reflected on these mistakes , I started studying other types of investing. This led me down a rabbit hole of swing and position trading, Momentum investing, Quantitative and Technical analysis and more

I am still a value investor at heart, but have incorporated the core principles of these approaches into my process

Keep an open mind

This is the key to your learning process. Do not think of yourself as an expert who knows it all. Always consider yourself as a beginner – in other words, keep your ego out. Be open to learning from other investors including ones who are much younger than you

I follow all types of investors as they bring fresh ideas and new approaches which sometimes don’t make sense to me. Whenever I am confused or find something is working but doesn’t make sense to me, my instinct is not to dismiss it but to dive deeper into it

That’s the reason I am obsessed with AI and other new technologies these days. I get energized when I find something new to learn and that gets me to the final point

To develop as an investor, you must love the process of learning and getting better at your craft each day.

We wrote the following note to our subscribers

We are in the middle of the earning season. I wanted to share what we are seeing and how we are thinking about the portfolio.

The overall results have been patchy with single digit topline and profit growth for several companies. There are sub-sectors which have shown better performance, some of which we hold in our portfolio

Private sector banks/NBFC : This segment has shown mid teens (15-20%) growth in topline and profits. As the rate cycle turns, it should help the NIM in case of banks which have a strong liability profile. We have two positions in this segment

PSU banks: Several PSU banks such as Union bank, PSB bank have shown decent results

Healthcare/Diagnostics space: Several companies in the diagnostics space have delivered good performance. These companies are 100% domestic and have no impact from Geopolitical issues. Our holding in this space has delivered good results

Jewelery: Companies in this space have posted high growth driven by gold prices. Kalyan jewelers had 37% growth in sales and profit. Titan company posted around 19% growth in sales. Also the continued rise in price could impact the demand for gold in time

Hotels: This segment continues to perform well with an increasing ARR driven by increasing demand supply gap. Demand continues to outpace supply.

Pharma/CDMO space: The long term trend of outsourcing research, development and manufacturing of NCE continues. This trend is similar to the IT services business which leverages the capability and cost arbitrage across countries. We hold a few positions in this space

Diversified without concentration

We cap the size of our positions at 5% and around 15% for any sector. This allows us to manage risk.

At the same time, we are also diversified across sectors. The upside is that some part of our portfolio is always doing well. The flip side is that some parts of the portfolio is also doing badly. That is the point of diversification

If your portfolio is doing too well at a point of time, then your diversification is too low. There is nothing good or bad about it – it’s a personal risk preference

As we have shared in the past, we prefer above average returns with below average risk. That means we will never have mind blowing results, but then we will also avoid stomach churning losses

For us investing is a 20+ year marathon. If we want to be around doing this in 2045, then its important to keep our blood pressure low and sleep well. An above average results for a very long time, will work wonders as our past record shows