There are a few steps to prequalifying an investment. Most good investors have some kind of checklist ritual that they go through before making an investment. Setting the right environment is a prerequisite and Mohnish Pabrai has a very good mental model worth cloning that by firstly moving away from Wall Street like Warren Buffett.
As I’ve always said, “copying good habits is the cheapest investment you can make”. Then the other questions an investor wants to ask are:
- What are the goals of the investment?
- What are the actions required to be taken?
- When do you review your investment position?
- Why are you still in the investment?
- What are the risks associated with making the investment?
- Why, Why and Why?
You need a checklist of items to assist you to avoid risk as also to stay focus on the most important things as you make an investment decision. I refer you to the following;
Atul Gawande wrote a book on the Checklist Manifesto
Warren Buffett’s Checklist
Charlie Munger’s Checklist
Howard Marks’ Checklist pages285-293
That’s all for now folks.
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