Eliminate weak investment ideas quickly and effectively to save time and energy
In this newsletter, we are are going to talk about the importance of having a robust and a holistic Preliminary Evaluation Framework for Incoming Investment Ideas. We will also talk about its ability to save time and energy and also about the factors you should keep in mind while developing such a framework for your own.
The next lucrative idea is just around the corner
The advantages of living in a hyperconnected world that we live in today, is well know to us. Just like any other walk of life, this hyperconnectivity has positively impacted investing as well. Therefore, finding the next lucrative investment idea worth studying has become a cakewalk these days.
Thanks to things like social media, investing forums, screening tools, circle of like minded people, news channels, etc. it is needless to talk about the difference these things have created in the life of an investor. But like they say, “Every coin has two sides”, this one is no different.
The problem of plenty
If we look at the flip side, the information overload that hyperconnectivity brings with itself is not hidden. To put this problem in the investing context, all the sources mentioned above are on their toes to tell you the next best investment idea you must evaluate.
This results in the “Problem of Plenty”, where one is constantly bombarded with investment ideas with good potential, which many times lead to confusion and exhaustion. However, the fact, as we all know but often forget, remains that out of all these ideas, only some are worth spending time and energy on and, even fewer are worth investing in. In investing, “Less is More.”
The Solution
If you are an investor looking to find lucrative investment ideas, there is almost a 100% probability that you are currently encountering this problem. If you are looking for a solution, don’t worry, that is exactly what we are going to talk about today.
So, the solution to the above mentioned problem is to have an effective framework of evaluating investment ideas at a preliminary level. Though this sounds easy, it is not a cakewalk and requires a much higher amount of thinking and execution than what meets the eye. In our understanding, an effective framework maintains a fine balance between the following THREE parameters.
The first step in building an effective preliminary evaluation framework is to consider the information needed to achieve the above balance.
Setting expectations
Expectations management is a large part of anything you do in life. If you are able to set the expectations right, the journey forward is very seldom bumpy. Therefore, it is vital to build reasonable expectations from the framework.
This is important because, after all, it’s a preliminary evaluation framework and cannot cover everything. The idea should be to uncover glaring problems (if any) so that you can cut through a lot of unnecessary investment ideas without spending hefty amount of time and energy.
Here is what you should expect from a preliminary evaluation framework:
What do we do at Bastion Research?
Now that we’ve explored all the essential components for crafting a comprehensive and efficient preliminary evaluation framework, let’s dive into the approach we’ve embraced. This method saves a ton of time and effort for us, all while keeping the above mentioned key elements in mind.
Summary of inputs that go into our framework and expected output:
As promised from the start, you now have a clear roadmap for crafting an effective preliminary evaluation framework for your investing. Plus, the summary of what we do at Bastion Research will be a handy starting point for building your own robust and comprehensive framework.
We’re excited to see what you come up with! Feel free to share your models and results with us—we’d love to see them in action.
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