Investment framework

A repeatable path from goals to action, with checklists to block impulsive trades.

1. Goals and time horizon

Segment capital first; return targets come second. Different buckets tolerate different volatility and liquidity needs.

Tier	Typical use	Horizon	Volatility	Main tools
L0 Safety	Emergency, 6–12 months expenses	Immediate	Very low	Money market, short bonds, cash
L1 Stable	Known need in 3–5 years (down payment, tuition)	3–5 yr	Low–medium	Bond funds, high-grade credit, deposits
L2 Growth	Retirement, long-term wealth	10+ yr	Medium–high	Broad indices, quality stocks, sector ETFs
L3 Opportunity	Asymmetric bets inside competence	Variable	High (loss capital only)	Single names, themes, alts (hard cap)

tip

Rule: Do not open L3 until L0 is full; L2 is the default battlefield; L3 is a capped “side bet.”

2. Circle of competence

“In the circle” means you can answer four questions with evidence from past reviews:

1. How does this business make money? (revenue and cost drivers)
2. What breaks it? (competition, policy, cycle)
3. Which metrics validate the story? (leading vs lagging)
4. What is cheap vs expensive? (at least two valuation cross-checks)

Default outside the circle: broad index or cash—not “let me research it and then buy.”

3. Workflow (single stock / theme)

flowchart TD
  A[Idea] --> B{In circle?}
  B -->|No| C[Index or pass]
  B -->|Yes| D[One-page thesis]
  D --> E[Valuation range + scenarios]
  E --> F[Size tier]
  F --> G[Buy checklist]
  G --> H[Hold: track falsifiers]
  H --> I{Falsified or fair value?}
  I -->|Yes| J[Sell checklist]
  I -->|No| H

One-page thesis template

Field	What to write
Name / industry	Ticker, chain position
Core logic (≤3 bullets)	Why look now
Key assumptions	Data that confirms each
Falsification	What proves you wrong
Main risks	Policy, competition, balance sheet, liquidity
Valuation anchors	P/E, P/B, DCF, percentiles—at least two
Intended hold	e.g. 2–3 years or “until metric X”

4. Buy checklist

Check every item; if one fails badly, wait 24 hours.

• Thesis and falsifiers logged in Decision journal
• Fits allowed L2/L3 bucket; within Discipline & sizing limits
• Can explain “why buy” in 2 minutes (Feynman test)
• Valuation not at historical extreme (or sized down for that scenario)
• Read latest report; know next-quarter events (earnings, lock-up, policy)
• Liquidity: average volume supports planned size
• Not acting because “it moved a lot lately” (see Biases)

5. Sell checklist

Sell reason must be one of these—and logged:

• Falsified: core assumption broken by data or facts
• Valuation: price at upper band without thesis upgrade
• Opportunity cost: clearly better risk/reward elsewhere (write the comparison)
• Rebalance: single name or sector over limit
• Liquidity need: L0/L1 cash required (not emotion)

warning

“Scared after a drop” or “everyone is selling” are not sell reasons. Tag as #emotion, wait 48 hours, rerun the checklist.

6. Information priority (personal)

Priority	Source	Use
High	Annual/quarterly reports, prospectus, earnings call transcript	Facts and management claims
Medium	Industry associations, leading-company segment data	Volume, price, structure
Low	Social headlines, short news	Clues only—not conclusions
Avoid	Unsourced price targets, “insider tips”	Ignore by default

7. Link to macro

Before sizing, skim Cycles & macro for the positioning dial: rates, credit, risk appetite. Macro does not pick winners; it sets how much for the same thesis.