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A Framework For Building Your Personal Investment Philosophy


What is an investment philosophy?

Your personal investment philosophy is a structured expression of your thoughts and feelings, establishing guidelines for how and where you invest your money. It takes into account not only your goals and timelines, but also your interests, values and beliefs about how your investment dollars are working for you and society at large. Building your personal investment philosophy allows you to create mental models that tilt the odds of being a successful investor in your favour.

Getting started with your personal philosophy.

Developing your own investment philosophy involves a thoughtful and structured approach. Here's a step-by-step guide to help you create your personalized investment philosophy:


• Start by understanding your financial goals, both short-term and long-term. Consider what you want to achieve with your investments and how they align with your life aspirations.

Balance over optimism

• The best investment philosophies err on the side of caution, and take a well-balanced investment approach that aligns with your financial goals and emotional temperament. A sound investment strategy starts with an asset allocation which is a mix of assets with different characteristics, such as stocks, bonds, and cash equivalents. Because all investments involve risk, investors must manage the balance between risk and potential reward through the choice of portfolio holdings.

Company analysis

• Consistent excellent performance can only be achieved through superior knowledge of companies and their securities, not through attempts at predicting what is in store for the economy, interest rates or the securities markets. While you are not expected to consistently select winning investments, your approach should be organized to significantly increase the likelihood of success while minimizing the chances of incurring losses.

Create a buffer to take advantage of opportunities.

• The markets are in a constant state of flux, and new investment opportunities are constantly arising. Creating a buffer in your investment strategy can be a prudent way to take advantage of opportunities that may arise in the financial markets. A buffer serves as a reserve of funds that you set aside for specific purposes, such as capitalizing on favorable market conditions, acquiring undervalued assets, or seizing new investment prospects.

Stress testing your philosophy.

By subjecting your investment philosophy to rigorous stress testing, you can gain a deeper understanding of its strengths and weaknesses. This process allows you to make informed decisions, refine your approach, and enhance the likelihood of achieving your long-term financial goals. Here are a few ways you can stress test your philosophy.

Sensibility of the Philosophy:

• Assess the sensibility of your investment philosophy by thoroughly understanding its underlying principles and assumptions. Ensure that your philosophy is based on sound financial theories, empirical evidence, and logical reasoning.

Rolling Period Returns and Persistence through Time:

• Examine the performance of your investment philosophy over various rolling periods, such as monthly, quarterly, or yearly. Analyze how the strategy has fared during both bullish and bearish market phases. A robust investment philosophy should demonstrate its effectiveness across different market cycles, indicating that it is not merely reliant on short-term trends or luck.

Applicability Across Different Markets:

• Stress test your investment philosophy across various market environments, including different economic conditions, industries, and geographical regions. Analyze how the strategy performs in both domestic and international markets.

Robustness in Value Premium Across Different Multiple Ratios:

• If your investment philosophy includes a value-based approach (e.g., investing in undervalued assets), stress test the strategy using various valuation multiples such as price-to-book, price-to-earnings, or price-to-sales. Verify that your strategy consistently generates a value premium across different valuation metrics, indicating that it is not overly dependent on a particular ratio.


• Analyze the cost-effectiveness of your investment philosophy. Consider factors such as expense ratios, transaction costs, and taxes associated with implementing the strategy. Ensure that the potential benefits of your philosophy outweigh the costs involved, and seek to minimize expenses where possible.

In conclusion, your personal investment philosophy is a powerful tool that guides your financial decisions and shapes your path towards achieving your goals. By considering your interests, values, and beliefs, you can build a philosophy that aligns not only with your financial objectives but also with your broader vision of a better society. To learn more about the investment strategies that are available to you, click here to schedule a no obligation consultation.

- Kondwelani Kalinda, Associate Investment Advisor

Kondwelani Kalinda is an Associate Investment Advisor at Endeavour Wealth Management with iA Private Wealth, an award-winning office as recognized by the Carson Group. Endeavour Wealth Management provides comprehensive wealth management planning for business owners, professionals and individual families.

This information has been prepared by Kondwelani Kalinda who is a Associate Investment Advisor for iA Private Wealth and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.


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