Stock picking takes far more mind space, time, and effort in every investor’s life. The time dedicated to stock picking far exceeds the time spent on investment strategy. Stock picking and investment strategy are connected in the middle. The reasons are not difficult to decipher. Deep within, we believe that stock picking is all that is required to deliver returns. By extension, if we buy the right stocks, then we think we will be on top of the game. In rising markets, this works very well. The celebrated investors and managers always float on the stocks they picked and how well they performed.
But, there comes a time in every cycle, when it is not easy to create reinvestment. Stocks you sell end up being far superior to the stocks you buy. At this stage, stock picking stops working. Actually, it begins to hurt. What can salvage such situations is a focused, holistic investment strategy. But, that hardly comes naturally or easily.
Developing and practising an investment strategy on which stock picking is an intrinsic essential is what we have long referred to as a process driven investing. But, in every cycle, this process gets dominated by rushed stock picking. This eventually derails the very process itself. The process then needs to be put back on the rails by focusing intensively on the strategy.
Risks need to be treated on an even keel with returns. Investing seems headed into a phase of concerted process redux.