Wisdom of the Ages - Part I

Is investing an art, a science, or a craft?

In art there are elements that can be taught. However, it’s the underlying creativity of the artist that defines his or her greatness; ergo it would seem that investing is not an art. The laws of physics, mathematics and science are universal, and they are absolute – they do not allow for exceptions. While investing may be scientific at times, there are also times when it certainly is not and we would contend therefore that investing is not a science. A craft is a skill that you learn by doing, by practicing. We increasingly consider investing to be a craft. And we believe, as investors, we can get better, more skilful, by practicing regularly.

Benjamin Graham is the author of one ofthe most influential books on value investing ever written, The Intelligent Investor. In the preface of the book he says:

“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework. You must supply the emotional discipline.”

It is the “intellectual framework” alluded to by Graham that we’d like to explore further as it aligns with Gryphon’s commitment to rules-based investing, thereby limiting the effect that emotions have on investment decisions.

While much of this framework is well served by an understanding of financial markets, economics, industries and individual stocks and bonds, a fair amount involves an understanding of history and human nature and, most importantly, our own individual natures.

Incorporated into this “intellectual framework” are, we believe, a number of personal characteristics that investors can strive to foster within themselves in order to grow their wealth. We’d like to expound this as a “personal philosophy”.

As with most things, what we are raising is not original or new…it is simply Wisdom of the Ages.

In this series we will reflect on the following: