The Art of Scientific Investing

Investment is an art with a scientific background. A person must be highly judgemental, analytical, inferential and mathematical before making any kind of decision regarding investments. The reason behind is that they are subjected to the risks of the market. Experts can train a person to get into the world of investment totally and also helps in the decision making of the problems which can be solved and have the greatest impact ever.

The rational and exact mindset of an individual enhances original thoughts towards a final decision as to the whereabouts of the investment policies and plans. The most complex and highly challenging market for investment is the equity market.

The two kinds of people who are devoid of the high risk mindset are the successful entrepreneurs and the capitalists. The reason behind such a mindset is that they are always working in a high risk environment. Their main focus is the avoidance of the risk factors and to lessen them as far as possible. It is a great learning on the ways and means to handle the risk situations. It means that they know the ways to avoid the loss of capital at the time of risks and to make the profit ratio high when the market is on their favour. If the focus is on the safety measures from the risk factors of the investments, then, the natural result would be alpha, better known as high excess returns.

So, the high returns are the results of sailing the risk factors simply by avoiding them. This is just the first step to formulate the method of alpha. A person must find out a company which has a highly disciplined risk avoidance investment procedure with business which is highly stable, has a good safety and security measure, enriched balance sheet, competitive advantages which are secular in nature and with a discount to elemental value. If an individual is successful in finding out such a company, then, the results would be really an encouragement to further investment. There are some cons as well which occurs due to some kind of behavioural errors. The initial behavioural error can be a kind of prediction or a belief that the market has escalations and diminishments. The next error would probably be that a particular stock has a risk return characteristic feature and you never know what will the outcome be.

There must be a very positive approach towards such kind of behavioural errors because nothing can be predicted as far as markets are concerned. Only the latest market trends can be taken into consideration and accordingly the investment  strategy can be formulated for the avoidance of the future risk factors. This acted as an impetus for the discovery of the scientific alpha investment engine. This investment engine is a probable mixture of a risk avoidance mindset while the operation of the assets which are at high risks and a scientific mindset to focus on the main causes with a reflectable approach.

It actually targets the significant and strong causes of the returns of investments and makes investment grade equity portfolios on that basis. This investment engine is well equipped with structured value investing approach. The main risk of losing one’s capital can be ascertained and ways and means to avoid the risk can be well defined. At each and every step, they have a zero-balanced approach and glides through all the investment schemes to make the best portfolio at that particular point of time. There are multifarious kinds of strategies which are flowing in the market which covers up large , small, micro and total capitals which are again summed up with the various versions of core, value and growth as well.

Various companies are highly beneficial in that sense. Some companies which have a low price can possess such a low quality that they can be overvalued in that sense. These companies are at the stake of losing their capitals as they do not have any stable business models. Secondly, they do not have a strong balance sheet. Finally, their uneven distribution of capitals lead to the total destruction of the equity of the share holder. Another weakness might occur due to the positive approach towards the company with the assumption of the high growth in the flow of the cash.

In the last few years, it has been seen that there is a tendency of influencing the highly developed portfolios. In such cases, the risks cannot be ascertained on a prior basis and can be learned by the means of experience only. The present economy has been totally disturbed by the social, economic, political, technological, environmental and legal concerns. This has brought an untimely reduction in the secular advantage period of the companies.

There are many companies in the market which have an excellent track record and are good quality moat companies. But the problem is that people would buy them without having a prior check in to their valuations and potential disruptions which are again susceptible to the end of their secular advantages. Now the question arises as to which are the companies that are over valued. It is indeed a good question in this scenario. The answer is that the companies whose names appear on the front page of the newspaper due to their extravagant performances are the ones that are over valued. These are the companies which go through a temporary trouble which lasts for about two years or so and a sale advice comes along and the opportunity is thus created. It is a kind of foolishness to chase a recognised company. It is recommended to search for those companies that do not have any recognition.

Thus, to sum up everything, the inference is to concentrate on the creation of an investment grade equity portfolio rather than specific companies. In the present scenario, mere identification of recognised companies do not have any relevance and importance. So, it is better to follow the rules and regulations.