Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
 
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Buy Right Sit Tight Insights - August 2016

Blog Blog Details
  • August 18, 2016
  • Mr. Raamdeo Agrawal|
  • Chairman, Motilal Oswal AMC
Raamdeo Agrawal,  Motilal Oswal AMC
Dear investor friends,

I am pleased to present the fifth edition of our “Buy Right Sit Tight Insights”. Through this series, we will share with you our investment insights and other ideas which we believe are relevant to the world of equity investing. 

This time, we discuss a very basic framework for equity investing – the Knowability-Importance Matrix.

Focus on the Knowable and Important; the rest is noise


 “There are two kinds of people who lose money: those who know nothing and those who know everything.”
— Henry Kaufman, economist & financial consultant


In the age of TV channels, mobile phones and internet, information overload is obvious. How does one take care of which information to accept and which to reject? The following 2x2 matrix helps me in allocating my time prudently:

The Knowability-Importance Matrix with associated probabilities


There are 2 types of information: Important and Unimportant. Further, within each of these, there are two types: Knowable and Unknowable

Important information is what one should be concerned about and where most of one’s time should be allocated. Even within the Important information, much of it may pertain to the future and hence Unknowable. Thus, very little of what is Important is Knowable.  Just to give it a numerical flavour, 99% of all information may be Unimportant and only 1% Important. Of this 1%, again 99% may be Unknowable. Thus, only 0.01% of all the information may be both Important and Knowable.

The human mind gets drifted into issues which are Important but Unknowable, particularly relating to global macroeconomic issues like Chinese credit bubble, Brexit, US interest rates, etc, etc. Our effort is to cut all the noise and allocate maximum time in researching what is Important and Knowable.

Basically, everything around the company / business / competition is what we focus on. Time is limited and how we allocate will decide where we get maximum edge.  True competitive advantage of an investor is in superior understanding of Value i.e. the Moat and Growth of the company. (Price is same for everybody.)

In conclusion

Howard Marks’ book “The Most Important Thing Illuminated”  has a chapter titled “The Most Important Thing is … Knowing What You Don’t Know”. The closing words of the chapter are apt in this context – 
“Overestimating what you’re capable of knowing or doing can be extremely dangerous – in brain surgery, transocean racing or investing. Acknowledging the boundaries of what you can know – and working within those limits rather than venturing beyond – can give you a great advantage.”

So let’s focus on what is Important and Knowable and put disproportionate effort over there. 

I welcome your feedback and suggestions for improvement. Please email the same to insights@motilaloswal.com.


Raamdeo Agrawal

Chairman





Disclaimer
This bulletin has been issued to explain our investment philosophy. The information contained in this document is for general purposes only and should not be construed as investment advice to any party. Readers shall be fully responsible / liable for any decision taken on the basis of this bulletin. Past performance may or may not be sustained in the future. This bulletin is not for circulation in general and is meant for intended recipient only. The bulletin does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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