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Investment beliefs


By Tim Mitchell, CFA | June 28, 2018

Tim Mitchell focuses on investment beliefs: what they are, why they matter and how to effectively implement them.

Going from good to great

We have long argued that good governance is a key factor that distinguishes the successful asset owner funds from the rest. Having strong investment beliefs is a critical part of that. In this article, we focus on investment beliefs: what they are, why they matter, what they should cover, how they are decided and how they are effectively used.

Figure 1. Beliefs matter

To save time Beliefs can act as shortcuts in our decision making, saving large amount of time
To enhance discipline and consistency Human behavior and psychology can be detrimental to investment success. Investment beliefs provide a strong foundation to make good decisions, especially in times of stress.
To help fill gaps Our knowledge of the world is incomplete and uncertain. We need beliefs to help us make decisions and avoid being "paralyzed" to inaction.
To help settle differences A good belief process will surface sensitive issues, encourage constructive thinking, socialize the issues and settle the differences.
To improve transparency Beliefs help decisions to be subject to greater transparency and greater institutional memory for the benefit of beneficiaries and stakeholders.
To promote insightful action The best investors have beliefs that are smart, incorporate deep insights and are thoroughly socialized (i.e., widely understood and acted upon).
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