The 6A's of Investing
Investing is difficult, particularly achieving sustained success over the long term. The investment objective is clear: success is out-performing the defined return and risk objectives. For most strategic objectives, articulating them is far easier than their achievement. The vagaries of time and circumstance can alter the best-laid investment plans. The challenge for the investor is the consistent application of a coherent investment framework that enables the investor to define how they create value, communicate the proposition effectively, and execute the investment program. The 6A investment process connects investment planning with execution to enable effective communication of the value proposition of the investment program.
Communication is critical for the investment program because separating investment skill from luck is a task that is notoriously hard to achieve. When the investment process is poorly defined, differentiating between luck and skill is difficult. A failure to communicate an effective investment process is equally damaging to the investment manager as luck may be the perceived driver of the outcome, rather than skill. The ability to communicate the why and how of an investment program is what drives sustainable performance.
Artful questions. Scientific answers.
Artful questions. Designing an investment program is where science and art intersect. Asking questions is art while science is a process. When they meet, they can combine to achieve the optimal strategic intent. The challenge is crafting artful question for each situation; otherwise, the scientific method lacks focus. Their interaction can impede or obstruct the process altogether, and thus impede achieving the strategic intent of the investment program. Since all investment programs differ, asking the correct questions are critical to success. Experience delivers knowledge of how to manage leading investment programs. Artfully asking questions permits the investor to focus on their essential factors of success.
Scientific answers. Science takes the lead to find the answers once establishing the area of focus. The 6A investment framework is designed to focus on the actions that are critical to success:
Assess: what are your assets, liabilities, and options?
Analyze: Where are your expected cash flows, returns, and risk?
Alternatives: how do you invest?
Align: who needs to be there?
Act: when to invest?
Adapt: why is portfolio performing?
While success is not guaranteed; the framework enables action by the investor when the future is uncertain, or an opportunity is present. Critically, the 6A investment framework will ensure that the investor stays on a mission towards realizing the strategic intent of the investment program.
Artful Science. The scientific process changed the world over the last few centuries as new insight into how the world worked delivered technology that continues to transform everyday life for the better. Investing is a process in its purest form. Each part of the method requires the other components to ensure that the investment process is complete. Critically, it reduces avoidable errors. Imagine driving a car that was not quality checked or taking medicine that did not have a trial process. The unexpected results deliver to much risk, particularly risk that is avoidable. The inherent uncertainty of investing for the future is sufficient risk: it's unnecessary to add additional risk to investment management. The 6A's of Investing does not remove all risk but manages risk in a coherent framework. The outcome is consistent investment management along the path to your investment objective.