Knowing when to employ time-tested investing virtues is a key to long-term success
Hi Todd, hope you're doing well and good luck with this new venture.
On discerning when it is or isn't a good idea to be greedy when others are fearful, this struck a cord with me because I try to capture some aspects of this through position sizing rules, and I recently updated those rules.
Because investing is an emotional pursuit filled with uncertainty, it's impossible to just say, right off the bat, that you should just have this or that amount in a given investment based on the risk & return profile. Instead, it takes time and skin in the game and an accumulation of mistakes before you begin to get a feel for what level of risk is tolerable for you, regardless of what might be theoretically optimal.
In my case, it took a couple of years and some seemingly very low valuations in the UK (and therefore relatively large position sizes) for me to realise that my position sizing rules needed to be slightly less aggressive.
As you say, discernment isn't something you can learn from a book. You have to learn it from life (although books can speed the process up and help us avoid catastrophic errors).
Love it - gotta have skin in the game
"Discernment is about knowing the right balance of each virtue." Well said. In my opinion, moral and investing models, in particular Ray Dalio's Principles, are (perhaps out of necessity) far too simplistic because the difficult choices are not to follow a simple rule in isolation, but what do when being forced to choose between/among competing "rules". Good writing oftentimes puts a character in such a situation, and the process of coming to a decision creates the tension and drama that gives that character depth and is entertaining to the reader. So it is with investing. However, when it comes to investing (or morality), people want simple rules to follow that will result in a desired outcome. Discernment is not simple. But better to have a complicated truth than a simple fiction.