Episode summary · Based on the recording of the conversation
In brief
Kliment Robev talks to a guest – also a licensed investment consultant – about how to build an investment strategy. In their view, the question of what to invest in comes too early: first one needs clarity about one’s own beliefs about the market and one’s personal circumstances, then a strategy is chosen and finally it is tested. For Robev, the question “which strategy is best?” always has to be followed by “best for whom”.
Key points
- The guest sets out four steps to be taken in order – beliefs about markets, personal factors, choice of strategy and a test of whether it really fits – while Robev likens the approach to building a house, which starts with the plot rather than the furniture, and notes that a genuine adviser does not sell a strategy but starts by asking questions.
- The guest singles out three key beliefs – whether the market is efficient, whether it can be predicted, and whether risk is something to avoid or the price paid for higher returns; Robev thinks the market is efficient most of the time but not always, as the crash during the COVID-19 pandemic showed, and the main risk he currently sees is that the artificial intelligence boom leads to overvaluation.
- Robev regards discipline as the decisive factor – a disciplined investor with two years’ experience can outperform a professor of finance – and distinguishes risk tolerance (“the psychology”) from risk capacity (“the maths”), citing the example of someone who sells at the bottom after a 10% fall and buys back at new highs.
- The guest recounts a client who put a large sum solely into Tesla shares on a friend’s tip and sold after a 50% drop, while the friend, who knew the company and believed in its long-term case, held on until the shares reached new highs – an illustration that there is no right or wrong strategy, only a suitable one.
- The survey of strategies runs from deposits, bonds and money market funds through balanced portfolios and index investing to individual stocks, trading and alternative assets such as crypto and collectibles, with the point made that risk should generally fall with age, but for someone in their twenties the biggest risk is taking no risk at all, because that is when one learns from mistakes and has time on one’s side – which does not mean using high leverage.
- As the final step, the guest cites Professor Aswath Damodaran’s three tests – the sleep test, the lifestyle-change test and the doubt test – and Robev closes with a call to keep things simple: an investor cannot control the market or “Donald Trump’s mood”, but can control their own actions and emotions.
Context
Episode 3 of season two of the podcast “Пари и посоки” (Money and Directions). The episode answers the question viewers asked most often after the previous conversation on psychological traps – “now I know what confuses me, but what do I do next?”; Robev invited the guest because of an article of his that he found very interesting.
Views reflect his position at the date of publication and are not investment advice. Regulatory information
