{"id":38377,"date":"2025-12-02T23:56:00","date_gmt":"2025-12-02T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=38377"},"modified":"2025-12-03T20:58:20","modified_gmt":"2025-12-03T12:58:20","slug":"investment-philosophy-2","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/","title":{"rendered":"What is investment philosophy?"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#The_Essentials_of_an_Investment_Philosophy\" >The Essentials of an Investment Philosophy<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#What_is_an_investment_philosophy\" >What is an investment philosophy?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#Looking_for_Market_Mispricing\" >Looking for Market Mispricing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#Profiting_from_the_Behavior_of_the_Crowd\" >Profiting from the Behavior of the Crowd<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#Why_do_we_need_an_investment_philosophy\" >Why do we need an investment philosophy?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#Most_people_dont_have_one\" >Most people don&#8217;t have one<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#Mistaking_Investment_Strategy_for_Investment_Philosophy\" >Mistaking Investment Strategy for Investment Philosophy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#Why_do_we_need_an_investment_philosophy-2\" >Why do we need an investment philosophy?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#The_Consequences_of_Not_Having_an_Investment_Philosophy\" >The Consequences of Not Having an Investment Philosophy<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#Buffetts_View_on_This_Topic\" >Buffett&#8217;s View on This Topic<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Essentials_of_an_Investment_Philosophy\"><\/span>The Essentials of an Investment Philosophy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_an_investment_philosophy\"><\/span>What is an investment philosophy?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>An investment philosophy is a systematic way of thinking about how markets work (and why they sometimes fail). It also explains your belief that specific errors occur repeatedly in investor behavior.<\/p>\n\n\n\n<p>Please note: &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/20\/thinking-outsourced\/\" target=\"_blank\" rel=\"noreferrer noopener\">Thinking cannot be outsourced<\/a>&#8221; Every investor must first possess the ability to think independently. In short, &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/08\/05\/think-different\/\">Investors need to think different<\/a>&#8221; Otherwise, it is impossible to develop a unique investment philosophy, especially since &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/02\/28\/think-keep-sane-in-crowd\/\">In the crowd, it&#8217;s impossible to think independently or keep sane<\/a>&#8220;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Looking_for_Market_Mispricing\"><\/span>Looking for Market Mispricing<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Why does an investment philosophy assume that investors will make mistakes? Because most active investment strategies are designed to exploit errors made by some or all investors in stock pricing.<\/p>\n\n\n\n<p>However, the &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/10\/07\/efficient-market\/\" target=\"_blank\" rel=\"noreferrer noopener\">efficient market hypothesis<\/a>&#8220;taught in business schools does not acknowledge the existence of errors in stock pricing. In the real world, investors&#8217; profits primarily depend on stock pricing errors.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Profiting_from_the_Behavior_of_the_Crowd\"><\/span>Profiting from the Behavior of the Crowd<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Market pricing errors are actually rooted in the behavior of people at a deeper level. When the investment behavior of the majority fails, leading to the frenzy of crowd behavior, the market manifests itself as pricing errors. This is when a select few investors with clear minds have the opportunity to capitalize on this opportunity and profit\u2014this is what Graham repeatedly emphasized: the purpose of the market.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_do_we_need_an_investment_philosophy\"><\/span>Why do we need an investment philosophy?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Most_people_dont_have_one\"><\/span>Most people don&#8217;t have one<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Most investors don&#8217;t have one. Even asset managers and professional investment advisors are like this. They often adopt strategies that have recently worked for other investors, but when those strategies fail, they abandon them and switch to a different one, repeating the cycle.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Mistaking_Investment_Strategy_for_Investment_Philosophy\"><\/span>Mistaking Investment Strategy for Investment Philosophy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The vast majority of investors\u2014including many who claim to have a profound investment philosophy\u2014actually lack a core investment philosophy. Most mistake investment strategy for philosophy and mistake imitating others for true conviction, which, unsurprisingly, is reflected in their past performance.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_do_we_need_an_investment_philosophy-2\"><\/span>Why do we need an investment philosophy?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>You may wonder, &#8220;Why do I need an investment philosophy?&#8221; The answer is simple: Without a foundational investment philosophy, it&#8217;s easy to jump back and forth between strategies, following the sales pitch of a certain advocate or a seemingly successful recent example. Without consistent thinking and a self-reliant logic, it&#8217;s impossible to develop sound reasoning, and certainly no logical results.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Consequences_of_Not_Having_an_Investment_Philosophy\"><\/span>The Consequences of Not Having an Investment Philosophy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Not having a fixed investment philosophy can have three negative consequences for your portfolio:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If you lack a guiding principle or a set of core beliefs, you&#8217;ll easily fall prey to charlatans or investment gurus\u2014people who claim to have found a magic strategy that can beat the market.<\/li>\n\n\n\n<li>When you switch back and forth between strategies, you&#8217;ll have to constantly adjust your portfolio, which can lead to high transaction costs and increased taxes.<\/li>\n\n\n\n<li>A strategy may work for one investor, but it&#8217;s often not suitable for another, based on their investment goals, risk tolerance, and personal characteristics.<\/li>\n<\/ul>\n\n\n\n<p>The result isn&#8217;t just that your portfolio may underperform the market; it could also lead to stress so severe it causes stomach ulcers. Even worse: When you have a firm understanding of your core investment beliefs, you gain greater control over your investment destiny, eliminating only those strategies that don&#8217;t align with your market perspective and tailoring them to your needs. Furthermore, you&#8217;ll be better able to understand the true differences and similarities between various strategies from a holistic perspective.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Buffetts_View_on_This_Topic\"><\/span>Buffett&#8217;s View on This Topic<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>I mentioned this at the beginning of Chapter 3, &#8220;Determination to Change,&#8221; in <a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/08\/26\/investors-beautiful-heaven\/\">&#8220;<\/a><a href=\"https:\/\/www.books.com.tw\/products\/0011029207\" target=\"_blank\" rel=\"noopener\">Investors Beautiful Heaven<\/a><a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/08\/26\/investors-beautiful-heaven\/\">&#8220;, shopping links in US,HK,MY,JP,AU,NL,TW<\/a>&#8220;:<\/p>\n\n\n\n<p>Buffett stated clearly at the 2009 Berkshire Hathaway shareholders&#8217; meeting: &#8220;In my opinion, business schools only need to teach two courses: one is how to evaluate a company, and the other is how to evaluate a company&#8217;s value from an investment perspective and how to view stock market fluctuations.&#8221;<\/p>\n\n\n\n<p>Please reread the quote from Buffett above, and you will understand: This is Buffett&#8217;s perspective on the topic of &#8220;What is investment philosophy?&#8221;<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"129\" height=\"90\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2025\/09\/investment_philosophy-Custom.jpg\" alt=\"investment philosophy\" class=\"wp-image-38378\"\/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/12\/02\/investment-philosophy-2\/\">What is investment philosophy?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/09\/08\/investment-strategy\/\">What is an investment strategy?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/02\/investment-philosophy\/\">What should a great investment philosophy include?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/02\/24\/andy-lin-investment-style\/\">The key points of Andy Lin investment style<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/09\/26\/long-term-investment-2\/\" target=\"_blank\" rel=\"noreferrer noopener\">Andy Lin&#8217;s long-term investment experience sharing<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/02\/28\/think-keep-sane-in-crowd\/\">In the crowd, it&#8217;s impossible to think independently or keep sane<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/01\/15\/crowd-get-lost\/\">The crowd tend to lose their judgment and get lost<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/09\/26\/out-of-the-ordinary\/\">How difficult to be out of the ordinary<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/01\/investment-is-not-voting\/\">Investing is not voting<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/02\/28\/think-keep-sane-in-crowd\/\">In the crowd, it&#8217;s impossible to think independently or keep sane<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/10\/07\/efficient-market\/\" target=\"_blank\" rel=\"noreferrer noopener\"><\/a><a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/10\/07\/efficient-market\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why is the efficient market hypothesis unreasonable?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/10\/20\/thinking-outsourced\/\" target=\"_blank\" rel=\"noreferrer noopener\">Thinking cannot be outsourced<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/08\/05\/think-different\/\">Investors need to think different<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Most investors\u2014including many who claim to have a profound investment philosophy\u2014actually lack a core investment philosophy. Most mistake investment strategy for philosophy.<\/p>\n","protected":false},"author":1,"featured_media":38378,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1548,50,13,31,19,18,11],"tags":[],"class_list":["post-38377","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investment-philosophy","category-benjamin-graham","category-investing-behavior","category-investing-methods","category-investing-principles","category-investing-strategy","category-buffett"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/38377","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=38377"}],"version-history":[{"count":14,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/38377\/revisions"}],"predecessor-version":[{"id":40496,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/38377\/revisions\/40496"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/38378"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=38377"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=38377"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=38377"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}