Checklist is an Important Tool in Investing. We all know so many things, but miss these , because we dont follow a regimen.
Nowadays I work with a Checklist around Risk Framework. This can be filled for every stock and even after buying the stock so that you cover important points and are able to react timely on new updates.
Start putting up Medium High and Low Risk against each of these items for your stocks.
This looks very good. I am a great proponent of using checklists for not making apparent and recurrent mistakes.
Quick questions…
Is there a decision model on using this? i.e. when will you say that risk is high? or low? When is a stock a no-buy. Is it a subjective judgement based on the feel after filling this sheet?
No…This model will not give Go or No Go answers, but if done objectively it will highlight immediately how risky your company is and then help in Portfolio Allocation Decision.
Also it will make you more aware and sensitive to few risks.
For eg, today one doesn’t even remember what the Geographical Risks for a stock are for eg say JB Chem.
Once you write this down on this framework, you will end up committing to your memory the geographical concentration (if any).
Also the purpose is to make you aware if your Portfolio is exhibiting similar characteristics across stocks.
Say are all B2B Cos, are all Gujarat Based, are all In the hands of few shareholders (for eg you may realise that all your stocks are owned 10% by X mutual fund, and hence a risk)
Thanks Ashwini for making a good start. None of us are following a comprehensive framework and end up doing individual takes!
To appreciate better the impact such a checklist can have on our investing go/no go decisions, we would love to see a filled up template in any of your recent/earlier decisions.
Not sure what you can share. But I know it will be greatly appreciated by folks like me who are pretty much risk-ignorant!
