What is not an investment philosophy?

An investment philosophy is about beliefs that drive judgment and decisions; it’s about how you think. But some active managers confuse what they think with what they do and present implementation-oriented statements as their investment philosophy.

Here are some common examples of statements that, while closely related to philosophy, are not an investment philosophy:

  • Investment Strategy: An investment strategy is the application of an investment philosophy to a specific set of opportunities. It emerges from a manager’s beliefs but, by itself, does not articulate those beliefs.
  • Investment Process: An investment process is a set of decision steps for executing an investment strategy. Describing the steps taken to make decisions doesn’t necessarily shed light on the beliefs that guide those decisions.
  • Investment Style: Investment style may help categorize a manager, but it does not provide a complete picture of the thinking that leads a manager to adopt a particular style.
  • Investment Objective or Goal: A return objective or capital protection statement is what a particular strategy aims to achieve for clients. Philosophy is about how investment professionals believe they can achieve these goals—not a statement of the goals themselves.

To learn more about the benefits of investment philosophy, we invite you to read our recent paper, “Rethinking Investment Philosophy,” by John Minahan and Thusith Mahanama.* Just click on the link below to read an executive summary.


READ EXECUTIVE SUMMARY


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