[INVESTMENT] INVESTMENT - ART OR SCIENCE

Lately, I came across a big name, FUNDSMITH.

Fundsmith is a global equity fund that was founded by Terry Smith in 2010. The fund follows a value investment approach, which is a strategy that seeks to identify undervalued companies and invest in them for the long term.

Fundsmith's investment philosophy looks simple and it built on three key principles: 

(1) buying good companies;

(2) not overpaying for them; and 

(3) doing nothing. 

Yes, you saw it right, DO NOTHING!

Fundsmith's investment approach is grounded in the belief that investing in good companies is a better strategy than trying to time the market or pick individual stocks. The fund takes a long-term view, with a typical holding period of more than five years, and has a concentrated portfolio of around 20-30 stocks.

Fundsmith's value investing approach has proven to be successful, with the fund delivering strong returns for its investors since its inception. However, it is important to note that value investing can be a challenging strategy, and investors should carefully consider their own risk tolerance and investment goals before investing in any fund or individual stock.

INVESTMENT – ART OR SCIENCE

The above really caught my attention in Fundsmith and I dogged through its website and read the letters to shareholders. The letters are easy to understand and most importantly provided me some insights to the Fundsmith's investment approach.

For value investors, the key to generating returns from revenue growth is to identify companies that are undervalued BUT have the potential for strong revenue growth in the future. This can be a challenging task, as there are many factors that can affect a company's revenue growth, including competition, market conditions, and changing consumer preferences.

Investing can be considered both a science and an art. On the one hand, investing involves looking at the company's financial performance, its competitive position in the market, its growth prospects, profitability, cashflow, assets to determine its value, analyzing data, conducting research, and applying mathematical models to make informed decisions about where to put your money. This aspect of investing is more of a science.

On the other hand, there is an element of creativity and intuition involved in investing that can be seen as art. Successful investors often rely on their instincts and experience to make decisions that are not solely based on quantitative data. They also need to be able to navigate the complex dynamics of the market, including behavioral biases and human emotions, which are not easily quantifiable.

Investing can be seen as both a science and an art, and successful investors need to be able to balance both aspects in order to achieve long-term success.