Philosophy

Over a dozen years ago I resolved to build the best fund I could. -- Tom Stanley
Tom Stanley

The Resolute Way: Tom Stanley’s Investment Philosophy

I have no claim that what has worked for me in the past will continue to work in the future, but I would like to share with you 25 principles I have learned over 39 years that helped me become a better investor.

  1. Be a Long Term Investor
    A long-term track record of outperformance is hard to achieve, but what we strive to accomplish.
  2. Have a Flexible Investment Style
    As any investment style becomes too popular, it becomes less effective.
  3. Actively Look for Ideas
    I find my best ideas; they don’t find me.
  4. Buy Only The Best Ideas
    Good ideas are hard to find, hence I prefer to buy only my best ideas.
  5. Filter out the Noise
    With information overload, the challenge is to use only what is relevant.
  6. Don’t Rely on a Single Perspective
    In an era of fake news have a broad range of information sources.
  7. Skepticism is a Virtue
    As I get older I am trying to teach myself to be more skeptical.
  8. Free Markets — An Outdated Concept from the Twentieth Century
    Strive to understand the motives and means of the players.
  9. Think Like a Fiduciary and Deal with Others Who Do
    Customers should NOT be treated as counterparties to be exploited.
  10. Corporate Governance Is Key
    Too many boards focus on how to enrich themselves rather than their shareholders.
  11. “Skin In The Game”
    I prefer boards and management to have their incentives aligned with shareholders.
  12. A Good Card Player Does Not Show His Hand
    Confidentiality is essential for successful small cap investing.
  13. Be Thrifty
    Moderate costs facilitate moderate fees. Moderate fees facilitate performance.
  14. Being Small is an Advantage
    It is easier to outperform being small.
  15. Know Your Limits
    It is just as important to know what I don’t know as it is to know what I know.
  16. Stay Humble
    Stay humble or the market will make you humble.
  17. Honesty
    Above all be honest with oneself.
  18. Do Your Homework
    Check facts with evidence-based observations.
  19. Too Much Emphasis is Placed on Precision
    I don’t need exact numbers or complex models to make decisions.
  20. You Don’t Have to Succeed by being Original
    You succeed by being right.
  21. Outperform by Being Different
    To have a chance of outperforming the indices, invest differently than the indices.
  22. Short Term Volatility is not Synonymous with Risk
    The obsession to reduce volality can impair long-term performance.
  23. Be a Contrarian
    Too many investors prefer to fail conventionally than succeed unconventionally.
  24. Look at Track Records
    Many prominent financial advisors and academics have no successful track record of investing.
  25. Critical Thinking Skills Are Paramount
    A formal education with rote learning has little to do with the critical thinking skills needed to be a successful investor.