Investment Thesis Template | Track & Improve Your Investing Decisions

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Investment Thesis Template | Track & Improve Your Investing Decisions


Published on August 15th, 2021

This article is a guest contribution by David Morris.  David Morris is a self-taught investor and a member of the Sure Dividend community. He aspires to developing expertise as a freelance equity analyst on an amateur and part-time basis, primarily for purposes of personal growth and self-fulfillment.

Hedge funds and large investment groups reportedly create investment theses for their potential investments. There’s value in formulating and recording the reasons for an investment beforehand.

Creating an investment thesis is not something reserved just for institutional investors. The ideas considered in this article are meant for self-directed investors.

What Is An Investment Thesis?

Typically, an investment thesis comprises a single sheet of paper upon which is written the basic idea(s) underlying an investment, completed when the investment is made.

Note:  Please click here to download your free investment thesis template now.

In simplest terms an investment thesis is your personal idea of what the future may hold. As you write that down, you’re also silently admitting that nobody actually knows the future. However, an investment thesis is different than your hope or dream for the future. It’s your reason or “thesis” for placing capital at risk as you consider the future prospects of a specific investment, made at a particular point in time.

Why Formalize Your Investment Thesis?

For one thing, writing your ideas down helps you maintain a steady investment focus.

Today, a multitude of financial writers promote this or that stock, exchange-traded fund, Real Estate Investment Trust (REIT) or Master Limited Partnership (MLP), and some of these writers can be quite persuasive.

However, it is sometimes the case that they are talking about other peoples’ money and products, and not necessarily their own. They may or may not believe in  the actual investment themselves.

So, an investment thesis calls for increased personal involvement and forces the self-directed investor to focus on reasoning, and to display just enough discipline to reduce their best thinking to a written sheet of paper.

Later on, it provides a way for an individual investor to “look back” at each investment made over time. It’s an excellent way to assess and make a fresh examination of the reasons for making an original investment.

Plus, it is downright fun to go back and remember what one’s own reasons were for investing, especially when things seem to have worked out more or less as planned. And, in cases when things haven’t worked out so well, the investment thesis can sometimes help us to actually take a hard lesson learned and apply it going forward.

The goals, reasons, and purposes for every investment can and they do change, because we investors are also constantly changing.

How Can I Organize When There Are Multiple Reasons For Investing?

To provide for user versatility, each individual investment thesis sheet is built for filing in an ordinary 8 ½ by 11 notebook. My own notebook is kept conveniently nearby for reference whenever the need arises.

Developments might arise that cause me to consider modifying a position, whether the modification involves accumulating more shares, disposal of some or all or the shares currently held, or even when deciding to maintain the position as is.

I originally created a simple investment thesis sheet for individual purchases of stocks. It wasn’t long until I realized it could also apply to multiple purchases if made on the same day, such as use of the “limit order” purchases across a day or even a longer period.

Employing a separate sheet of paper for each purchase also permits wide flexibility for those like myself who have multiple accounts at a single brokerage or multiple brokerage houses. I like to alphabetize my holdings by ticker symbol and to use notebook dividers to separate my stocks holdings according to each account I hold. It is evident, of course, that multiple purchases of individual stocks over longer time intervals can also be organized alphabetically according to individual ticker symbol, with a notebook divider used to segregate individual companies. The organization and filing of collections of sheets offers great flexibility to owners and operators of self-directed stock accounts.

Some people find it to be far more user friendly than clicking back and forth across internet-based brokerage records, all the while trying to entertain investment decisions. Plus, I haven’t yet found a brokerage that offers the idea of writing down the investment basis for each stock individually as they may be purchased for different reasons, and applied to each of several accounts.

Is An Investment Thesis Like An Investment Journal?

The investment thesis sheet is distinguished from an investment journal, which may also be a good idea for self-directed investors.

Whereas a journal can record a variety of thoughts, premises, hopes, and investment ideas, the investment thesis only records purchases and defines the premise or thesis for each one.

What If I Have More Than One Reason For Making Investments?

Well, that’s actually the point. There are any number of reasons why investors invest. The investment thesis template provided at the end of this article displays many commonly expressed reasons for investing. There is also space for reasons that are unique or not part of the usual pre-conceived listing.

Also available is room to record information about current and future dividends, including dates, yields, and dividend frequency (whether income is earned monthly, quarterly, or even annually). Here too, investors have plenty of choices. An Investor can simply check off any investment goals that apply at the time, or prioritize one or more apparent investment goals by number.

The template also provides a place to write down the expected investment time frame; whether short or long term. And, individual investors are free to define the time frame according to their preferences and understanding. You might, for example, employ those terms as they typically correspond to various tax laws.

On the other hand, and in keeping with the dividend philosophy such as that advocated by Sure Dividend and others, you might employ longer periods, like “expected five year return.” You might even be like Warren Buffett, who opined that if you don’t feel comfortable owning a stock for ten years, you shouldn’t consider owning it for ten minutes. The point is, the expected term of any investment is also a part of the original investment thesis you get to decide.

Closing Thoughts

It is often said that the stock market is a forward looking or future oriented entity, with investors being advised to look six months or so ahead when making investment plans. The investment thesis template is an excellent mechanism for recording forward looking plans as well as for looking backwards at future intervals to re-assess both the accuracy of the original thesis and the then-current plans for a renewed or updated proposition.

The greatest advantage to use of the investment thesis approach may be the broader perspective that can be gained through considering investments over varying time periods.

Please click here to download your investment thesis template now.

Thanks for reading this article. Please send any feedback, corrections, or questions to support@suredividend.com.


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