Investment Thesis Our investment criteria at Venture Mechanics is quite simple: . an additional $250K-$750K investment, after which the company would be .
I found this great psychology site today while looking for images to use in this article, and it expertly summed up my opinion of investment theses. The is a psychology competition that forces grad students to summarize their dissertations, research, and findings in under three minutes so that the general public can understand it.
Why do you need an investment thesis in the first place?
4 days ago . Oracle's Software Business Stays Strong As Hardware Struggles . Ray Dalio Succinctly Explained His Investment ThesisAnd It's Deep .
The beliefs that investors decide to use when determining what investments to purchase or sell, when to take an action and why. An investment thesis helps investors establish goals for their investments, and measures whether they have been achieved, either in written form or simply as an idea. A sound investment thesis can be a foundation for a profitable . On the other hand, an incorrect investment thesis can result in sub-par returns or losses.
How will I judge the effectiveness of my holding, and whether my assumptions are right or wrong?
It is often more helpful to have targets based on earnings, or industry growth, as opposed to specific price targets. Valuations (and therefore price) can and will change over time, and not just in relation to the broad market. Individual companies hit their strides at different times, and nobody knows for sure how a specific market will mature. Investor sentiment will often rally behind a stock well in advance of actual earnings growth, and too much focus on the stock price can detract from the broad view of your investment thesis.Most investment theses are in written form, and can be used to look back and analyze why a particular decision was made in the first place - and if it was the right one.
Let's say an purchases a stock based on the investment thesis that the stock is . The thesis further states that the investor plans to hold the stock for several years, during which he expects its price to rise and reflect its true worth. At that point, he intends to sell at a profit. When the a year in and everyone is selling, the investor reminds himself of his investment thesis. He decides that he should not sell, but rather continue to rely on his original analysis and hold the stock.
So, consider writing down an investment thesis when you invest in . It’ll help you determine whether you should really invest in the company, and can also be revisited later in moments of doubt to see if your reasons for investing are still intact within the company.