Actionable insights — The Psychology of Investing

1. Write the thesis before the purchase, in three fixed questions

1. Before buying a single share, answer in writing: what does the company do, why do I think it is undervalued, and what growth rate do I expect in the years ahead.
2. Date the entry. It is now a falsifiable record rather than a memory that will be revised to fit the price.
3. Re-read it on every subsequent decision about that position — adds, trims and sells all get checked against it.
4. Keep it in one place, so the whole book can be reviewed at once.

• Silent revision. A thesis edited after the price moves is no longer evidence about your judgment.

2. Fix the sell conditions before you own the position

1. Write the exit criteria at purchase, when you have no exposure and no emotional stake in the answer.
2. Limit them to three: the fundamentals have permanently shifted; the valuation "defies all logic"; or you have found a significantly better use for the capital.
3. Note what is deliberately absent — a falling price is not on the list.
4. When a sale is proposed, require it to name which of the three applies. If none does, it is an emotional trade.

• "Permanently shifted" being read too narrowly to ever trigger. The criterion needs an observable test, not a judgment call made under stress.

3. Classify every decline before acting on it

1. On a sharp fall, ask one question first: is this a price event or a business event?
2. Look at the operating evidence — customers, volumes, margins, cash — not at the chart or the commentary.
3. A price event with intact fundamentals is an opportunity to add; a business event is a thesis problem.
4. Only after the classification is made do you decide what to do.

• Classifying without understanding the business. The post is explicit that this only works if you know what you own — otherwise "a falling stock price looks like a warning."

4. Install a delay between the urge and the trade

1. Adopt a fixed cooling-off period — 48 hours — that applies to buys and sells equally.
2. Trigger it on the feeling, not on the size: any urge to act immediately is what the rule is for.
3. Use the interval to write the reason down, which usually resolves it either way.
4. Accept the cost: some opportunities will be missed, and that is the premium paid for not making the expensive mistakes.

• The rule being suspended exactly when it matters. A cooling-off period you can override is a preference, not a rule.

5. Replace the price with Owner's Earnings on your dashboard

1. Compute Owner's Earnings growth for each holding: EPS growth + dividend yield.
2. Track it on a fixed schedule and make it the number you look at, rather than the portfolio value.
3. Compare its long-run growth with the share-price performance; a divergence is the position, not a problem.
4. Act only when the Owner's Earnings line changes direction.

• Buybacks flattering EPS growth. Owner's Earnings rewards share-count reduction identically to real growth, and they are not the same thing.

6. Apply the whole-business test to every purchase

1. Before buying, ask whether you would buy the entire company at its current market value if you could.
2. If the answer is no, you are not buying a business — you are buying the expectation that someone will pay more, which is the Greater Fool Theory.
3. Force the question by writing the market capitalisation next to the share price in the thesis note.
4. Re-ask it at every add: the test changes as the price does.

• Answering yes on quality alone. The test is about the price, not about whether you admire the business.

7. Size positions by the sleep test, not by the model

1. Set a maximum weight per position on the explicit premise that "even a great company can fail."
2. Calibrate it to a behavioural threshold: no position so large that its daily moves keep you awake.
3. Trim to the limit when a winner grows through it, and treat that as risk management rather than as a view.
4. Check the limit again in a drawdown, when the same weight feels different.

• The threshold drifting upward during a good run — the sleep test is easiest to pass at exactly the wrong moment.

8. Manage the information diet as part of the process

1. Recognise the incentive: "financial news is designed to make you act (and earn ad revenue)."
2. Replace it with primary sources on a slower cadence — annual reports rather than daily commentary.
3. Set a fixed frequency for checking prices, and make it much lower than the frequency at which they change.
4. Keep a decision journal that records how you felt, not just what you did, so the emotional pattern becomes visible over time.

• Substituting one stream for another. Community chat about your holdings can be as action-inducing as the news it replaced.