Several years ago, an investment-manager friend told me about the thirty-second rule. It’s a powerful (yet remarkably simple) way to think about investment analysis — one that has stuck with me ever since that initial conversation. “When you look at any investment,” he said, “you should know if it works within thirty seconds or less.” At first I was skeptical. This sounded more like getting a psychic reading than a sound strategy for investing. But — as he went on to explain — there’s actually a lot to be said for first impressions, whether it’s for people or stocks. Here’s… Read More
Several years ago, an investment-manager friend told me about the thirty-second rule. It’s a powerful (yet remarkably simple) way to think about investment analysis — one that has stuck with me ever since that initial conversation. “When you look at any investment,” he said, “you should know if it works within thirty seconds or less.” At first I was skeptical. This sounded more like getting a psychic reading than a sound strategy for investing. But — as he went on to explain — there’s actually a lot to be said for first impressions, whether it’s for people or stocks. Here’s how his rule works. Basically, you divide potential investments into three groups. The first group consists of ideas that clearly don’t work. These have an obvious flaw. My friend estimated this amounts to about 5% of all the investment pitches out there. These are the ones we instantly reject. The next group of potential investments is the “in-betweens.” My friend theorized that most investments out there fall into this category. As the name suggests, these ideas are all plausible. To varying degrees, they have good points and weaker points. But none of them is so strong that it jumps out… Read More