The need for an investment thesis

Hey folks, welcome back to investream. I'm Punkaj and today we're going to talk about building an investment thesis coming up next. If you've got questions, please feel free to ask questions in the comment section below. If you don't want to ask them in the comment section below. You can reach me on Twitter, you can reach me on Facebook, you can reach me on Telegram, you can reach me on a whole bunch of different sources. So please feel free to ask any questions that you might have. I will do my best to answer them as quickly as possible. Alright, so what is an investment thesis and why is it important? Well, one, an investment thesis is essentially a plan that you have for how you're going to invest, why you're going to invest, and why you're going to stay invested or get out of something that you've invested in already. So, for example, I met one person a couple of years ago. His whole thesis revolved around investing in entrepreneurs that graduated from iit. And if you did not graduate from iit, he would not even look at the pitch. If you graduated from iit, he'd look at the pitch. And then of course it had to meet his other criteria. But you know, his whole thesis revolved around investing in founders who came from IIT. If you haven't yet subscribed to my YouTube channel, please click the link in the description below, go over to YouTube and hit the subscribe button and don't forget to hit the little bell icon so you can get notified of every single new episode of InvestStream that comes out. If you haven't yet subscribed to the YouTube channel, please hit the subscribe button and don't forget to hit the little bell so you get notified of every single new episode that comes out. My investment thesis is a little bit different for angel investing. When I invest in a startup, I like to invest in something that I understand and can relate to. So for example, I'm not 22 years old, just graduated college and looking for my first job. So though that market is a important market, it's a market that is probably a very large market. It's not a market that I can relate to today, and it's not a market that I typically understand unless I have some sort of firsthand knowledge of that market. So if I had a younger sibling or a friend that was graduating and trying to get a job, I might have a little bit more context around that market. But because I don't, it's just not something that I will likely invest in on the public market side, I'll invest in companies where I actually use the product. So. So you could probably tell which companies I've invested in. But so early on, when I first started investing in public markets, made a lot of mistakes. I invested in all kinds of things that I had really no understanding of. You know, it was going up. So I put money in. It was something that a friend recommended. So I put some money in and I lost a lot of money just doing silly things like that. I didn't really have anybody to kind of guide me on like, hey, what types of investments should I look at? How should I look at these investments? How should I evaluate them? Sure, you know, you learned some things in college, but it wasn't enough, right? So, you know, through a lot of trial and error and a lot of painful trial and error, I realized that, you know what, let's stick to companies where I use the products, have a appreciation for those products as kind of the starting point. So, you know, for example, I'm not going to invest in a shipping company because I don't do a whole lot of shipping. But I have invested in Apple because I use Apple products. And funny enough, I only bought Apple stock after I bought my first Apple computer. So, you know, it became kind of a starting point for me to decide what to invest in. I'm not a real estate investor, so I haven't really developed a thesis around investing in real estate. But there are friends and folks that I know who have an investment thesis around real estate. Now, the important thing to remember when you're building out your thesis is why did you invest in something in the first place? And why would you sell it? Right? So these are the entry point and the exit points become kind of important in making a decision. The exit option isn't as important when you're talking about startups because they are highly illiquid investments. And you're probably not gonna be able to pull your money out whenever you want. However, when it comes to public markets or real estate or cryptocurrencies, you could sell that asset whenever you feel like, or at least try to. It might be a little bit illiquid, or it might be very liquid. You know, if you talk about Google stock, yeah, it's very liquid. But if you're talking about a piece of property in Wisconsin, it may not be as liquid as Google stock, but you can still decide when you want to sell. With startups, it's a little bit different. You can't. But, you know, sometimes secondary sale options come up Sometimes there are opportunities for you to sell some or all of your stake in a startup. So you know, why did you invest in the company in the first place? What has happened since then? You know, an investment thesis should evolve just as the environment around us evolves, just as changes take place in the startup that you invested in, or the public stock that you invested in, or the real estate market. So you want to take all those things into account and evolve your investment thesis over time. But you should have very clear guidelines as to when you're going to invest in something and why you're going to invest in it and, and when you're going to get out. Why are you going to get out? I hope this is helpful. I hope it gives you something to think about when you're building out your investment thesis and it gives you some ways of putting some guidelines in place for yourself and fine tuning them over time. I would love to hear about your investment thesis. You know, do you have one when it comes to real estate, to stocks and bonds, to startups, to cryptocurrencies or any other investment class? I'd love to hear about that. Thanks again for joining me and I'll see you again next time.