I started Junto with a simple idea of finding terrific publicly listed companies to invest in over the long-term and assemble a community of like-minded investors who don’t find that idea all too bad.
I approach investing as an art as much as a science and I believe that it’s probably much less a science than people (and the money management industry) think. How else can perfectly intelligent and hard-working people, like the majority of the financial industry, at times look like absolute simpletons when the tide runs out, as it occasionally does? Or why is it that a simple low-cost index fund beats the average active manager year after year?
I think that this phenomenon is a result of a few factors.
First, the incentive structure of the finance profession and the pressures coming from clients, employers, and employees create a short-term mindset to be active for the sake of activity. Professional managers over-diversify for the sake of job security and trade excessively for the sake of action, sacrificing long-term performance and value creation for clients.
Second, it’s a result of what behavioral psychologists call framing and reinforcement biases due to constant exposure to the industry itself. To approach investing intelligently, the investor would simply need to detach and look further than the frame of finance to achieve rationality by utilizing and reading from multiple intellectual disciplines.
This is no new observation. The importance of multidisciplinarity in investing has been preached many times, most notably starting in 1995 when Charlie Munger gave his famous speech, “The Psychology of Human Misjudgment”, at Harvard. In that speech, Munger summed up the approach of understanding the world through mental models from major disciplines such as physics, economics, and psychology. Despite the preaching, it seems that only a small sub-part of investors has really taken up the practice to study widely and deeply in order to invest rationally.
This brings me to the third factor: time. The fast-paced and pressuring culture of the finance profession simply does not allow the amount of time necessary to fulfill the two prior factors.
The purpose of Junto is to fish in the less crowded pond. In my research, I take the time to connect the dots collected by studying extensively a wide amount of books, periodicals, annual reports, SEC filings, and more to uncover the greatest investment opportunities and wonderful businesses that I understand, all the while incorporating Munger’s element of multidisciplinarity.
Junto is a place where members can escape the conventional short-sightedness apparent in the stock market and think more deeply about not just companies, but also other worldly lessons, all in the pursuit of becoming more intelligent investors.
I act when opportunity comes knocking. But due to shifting market efficiency, these opportunities often do not knock. For Junto members, this is a vital element to understand. I make an investment when I find something which I understand and is more attractive than my next-best opportunity, or which decreases the overall risk in the portfolio without sacrificing potential gain. Otherwise, I add to current investments. This means that my internal opportunity cost is my core measurement for finding new investments and that I can sit on my ass for long periods of time (with plenty of time to study stocks as businesses). This also means, contrary to conventional methods, that I do not set goals for the number of trades I do within a certain time period, nor do I follow any rebalancing, diversification, or turnover targets for the investments I make.
Because my investment portfolio differs largely from the mean, there will be periods where I significantly underperform the market and periods where I perform tremendously better. There will also be times of mistakes to learn from. I take short-term pains with equanimity in my pursuit of performing very satisfactorily in the long term.
As a member, you can follow my investment journey with complete transparency, invest right alongside me, and see the entirety of my process. You’ll get access to a growing library of company write-ups (I post two per month), get on the members-only email list for portfolio changes, and get access to my research tool Sanity Check as well as the Sanity Check Database where I upload models for every company I look at.
I look to partner with like-minded investors who are interested in a patient, long-term investment approach that is rooted in the principles of value investing. If that sounds like you, you will inevitably find tremendous value with the membership.
To become a member, click here.
(The nerd behind Junto)
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