My Simple Investing Framework
How I Think About Buying, Sizing, and Executing
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I've spent years reading about investing and even more years making mistakes.
What follows is the framework I actually use now - distilled from the people who changed how I think about deploying capital.
It fits on one page.
If your investing framework doesn't fit on one page, it's too complicated.
Asymmetry
Every investment I make comes down to one thing: asymmetry. The upside has to be multiples of the downside. If it isn’t, I’m not interested, no matter how good the business looks.
But asymmetry isn’t just about price. A stock trading at half its intrinsic value isn’t asymmetric if the business is deteriorating, because the intrinsic value is a moving target heading the wrong way. And a wonderful business isn’t asymmetric if you’re paying for perfection, because any stumble wipes out the upside.
Asymmetry comes from the combination of everything - the right business, at the right size, growing the right way, with enough runway ahead, at the right price. That’s what I’m really screening for. I use five lenses to find it, and I think of them as SQGLP: Size, Quality, Growth, Longevity, and Price.
Size. Small companies have the most room to compound. I now focus on micro-caps - sub-$500 million - where the big funds can’t play and prices are more likely to be wrong.
Quality. Owner-operators with real skin in the game. High and expanding returns on invested capital. A balance sheet that can weather downturns. Some kind of moat that protects the business from competition.
Growth. Not just revenue growth - the quality of that growth. Organic over acquisition-driven. Margins expanding as the company scales. And crucially, the ability to reinvest at high rates. Without reinvestment opportunities, cash piles up and returns decay.
Longevity. How long can this company compound? The 100-bagger studies all point to the same thing: the stocks that returned the most did so over long periods, not through one explosive year. I want a decade or more of runway ahead.
Price. Even the best business is a bad investment if you overpay. I need the valuation to make sense under a moderate-growth scenario, not just the bull case. The best entries come when a good business is priced for mediocrity.
The Concentration Question
Most of what people know about Buffett comes from the Berkshire era, when he was managing hundreds of billions and diversification was a necessity. The early Buffett - the partnership Buffett - routinely put 25 to 40 percent of the fund into a single idea.
Munger was even more concentrated.
The lesson is simple. Diversification protects against ignorance. If you’ve done the work, concentration is how you capitalise on the edge. I hold somewhere between five and fifteen positions. My biggest positions are my highest-conviction ideas.
How I Size: Start Small, Scale In
This is the part I got wrong for a long time, and it’s something I picked up from Ian Cassel.
The instinct is to go big when you first discover an exciting stock. You’ve done the research, you’re convinced, and you want a meaningful position immediately. I used to do exactly this - build a full position on the first buy. The problem is that conviction at the point of purchase is always highest and least tested. You haven’t lived with the position yet. You haven’t seen how management communicates during a bad quarter. You haven’t felt what a 25% drawdown does to your ability to think rationally about the thesis.
Now I start small. The initial buy should never be the full position. How much depends on the setup - the quality of the asymmetry, the liquidity of the stock, the strength of conviction - but the principle is the same: don’t bite off too much at the beginning. For micro-caps especially, where liquidity is thin and a single seller can move the price 20% in a day, starting small is how you preserve your ability to be a rational actor later.
As the company executes, as management delivers, as the thesis confirms, I scale in. The position gets larger as conviction grows and risk decreases. This is the opposite of how most people invest. Most people size biggest at the point of highest uncertainty and smallest at the point of lowest uncertainty. I try to flip that.
The Part Most Investors Skip: Execution
This is the most important section, and it comes from Lee Freeman-Shor’s work. He ran a fund where he gave millions to dozens of the world’s best investors and tracked everything they did. His conclusion was uncomfortable: the quality of the stock picks mattered far less than how people behaved after buying.
He found five types of investor behaviour, and knowing which type you’re being on each position is the difference between compounding and bleeding out.
Rabbits freeze when losing. The stock drops and they neither cut nor add. They hold and hope. This is the worst behaviour, and it’s the most common. If I catch myself doing nothing on a losing position, alarm bells go off.
Assassins cut losers quickly. They accept they were wrong, take the loss, and redeploy the capital. No attachment, no hope. This takes discipline, but it preserves capital for the ideas that work.
Hunters average down, but only with conviction. They see the drop as a gift, not a problem. This is powerful when you’re right, but dangerous when you’re wrong and can’t tell the difference.
Connoisseurs let winners run and add to winners. This is the best behaviour. When a position is working - thesis confirming, price rising, fundamentals improving - the connoisseur recognises the easy money is ahead and leans in.
Raiders take profits too early. The stock is up 40% and they sell, only to watch it triple. The instinct to lock in gains feels prudent but it’s often just cutting your flowers.
Most of my investing mistakes come down to being a Rabbit when I should have been an Assassin, or being a Raider when I should have been a Connoisseur. The framework doesn’t prevent the emotional pull, but it gives me a language to recognise what’s happening - and a prompt to act instead of freeze.
The Whole Thing
Asymmetry is everything - and SQGLP is how you find it: small companies, high quality, strong growth, long runways, and reasonable prices. Concentrate in your best ideas. Start small and scale in as the thesis confirms - never build the full position on the first buy. Then execute honestly: cut losers decisively or add with conviction, but never freeze. Let your winners run.
That’s the framework.
Thanks for reading.
Dom
Schwar Capital
Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute financial, investment, or other professional advice. The opinions expressed here are those of the author and do not necessarily reflect the views of Schwar Capital. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The author may or may not hold positions in the stocks or other financial instruments mentioned. Always do your own research or consult with a qualified financial advisor before making any investment decisions. You can see our full disclaimer here.
Dom: Good ideas here. Thanks for sharing. I'm finishing a book on this all-important concept of expected value (asymmetry) and how superinvestors decide.