Investment Decision Framework

Deciding whether to invest: thesis fit, risk and reward, valuation, evidence versus unknowns, alternatives, downside and upside, and fit with the portfolio you already hold.

Not 'is this good?' but 'is this good at this price, for me?'

Lessons

• Ask whether it fits your thesis before asking whether it is good — A good company outside your thesis is a different decision from a good company inside it. Checking fit first stops attractive deals from quietly rewriting your strategy. (9 min)
• The same company can be a good investment at one price and a bad one at another — An investment decision weighs the range of outcomes against the price paid. Scenario-based expected value shows how quickly a higher price erodes the return from the same company. (11 min)
• Sort what you know from what you assume from what nobody can know yet — Before deciding, separate verified evidence, assumptions that could be tested, and genuine unknowns. The decision is about whether the unknowns are acceptable at this price. (10 min)
• Every yes spends money that could have gone somewhere else — An investment decision is a comparison with alternatives: another deal, a follow-on in an existing holding, keeping reserves, or not investing at all. Naming the alternative clarifies the decision. (9 min)
• Size each investment for the likely loss, not the hoped-for win — Once an investment is attractive, the remaining decision is how much. Position size should reflect the probability of losing everything, the portfolio you plan to build and what you can afford to lose. (10 min)
• Write the decision down before you know how it turns out — A decision record captures what you decided, why, the conditions, the main risks and what would change your mind. It turns each decision into something you can learn from later. (9 min)

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