An investment thesis is your written argument for why a stock is worth buying right now. Not "it looks cheap" or "my friend recommended it" — a specific, falsifiable reason the business is mispriced relative to its intrinsic value.

Why it matters: The moment you write your thesis, you create accountability. You can no longer claim you "had a feeling" — you have a documented argument that either holds or breaks.

A good thesis answers:

• What does the market misunderstand about this business?
• What is your variant perception — why do you see something others don't?
• What specific business condition would prove you wrong?

Example: "Capitec is undervalued because the market is pricing it as a credit business, when it's actually becoming a full-service digital bank. As digital account penetration grows past 40%, the re-rating should reflect the platform premium — not the credit risk."

That's a thesis. "Capitec looks cheap" is not.

Tier 1 — Hold indefinitely unless the thesis breaks. These are businesses you believe in deeply. You're not buying them for a catalyst or a price target — you're buying them because the business is exceptional and you plan to compound alongside it for years. You sell when the business changes, not when the price does.

Tier 2 — Catalyst-driven. Reviewed at 12 months. These positions have a specific event or re-rating that you're waiting for. A new management team, a regulatory change, a product launch. If the catalyst hasn't materialised by 12 months — you exit. No sentiment. No hoping. Out.

Why this matters: Most investors hold Tier 2 positions like Tier 1 ones. They wait for the catalyst, it doesn't come, and suddenly they've held a mediocre business for 3 years telling themselves "it's still coming." The tier system prevents this.

Rule of thumb: Never let Tier 2 exceed 30% of your portfolio. The clock is always running.

An exit trigger is the specific business condition that would make you sell — defined before you buy. Not a price. Not a percentage drop. A condition.

Price-based exit (wrong): "I'll sell if it drops 20%." This is reactive. You're letting the market tell you when your thesis is broken — but prices move for all kinds of reasons unrelated to your thesis.

Thesis-based exit (right): "I'll sell if Capitec's digital account growth drops below 15% for two consecutive quarters." Now you're watching the business, not the price.

The key insight: You define the exit trigger when you're calm, rational, and doing research — before you have money on the line. The moment you're watching your position fall, emotion takes over. Your pre-committed trigger protects you from that version of yourself.

"The need to sell is clearest when you're about to buy. Write it then."

Value investing is the practice of buying businesses that trade below their intrinsic value — and holding them until the market recognises that value. It was formalised by Benjamin Graham and refined by Warren Buffett.

The core idea: In the short term, the market is a voting machine — it reflects sentiment, fear, and momentum. In the long term, it's a weighing machine — it reflects the actual value of businesses. Value investors exploit the gap between the two.

Margin of Safety: Graham's most important concept. Always buy at a significant discount to your estimate of intrinsic value. This protects you when your analysis is wrong — which it will be, sometimes.

On the JSE: SA equities are often structurally under-owned by domestic investors anchored to global benchmarks. This creates persistent mispricing in quality local businesses — exactly the gap a disciplined value investor can exploit.

Buffett's most important lesson: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Step 1 — Open a brokerage account. EasyEquities is the most accessible for SA retail investors. Low fees, fractional shares, and access to JSE and US markets. Standard Bank, FNB, and Investec also offer trading accounts.

Step 2 — Use your TFSA first. Your Tax-Free Savings Account allows R46,000/year (R500,000 lifetime) of tax-free growth. No CGT, no dividends tax, no income tax on returns. Always max this before taxable accounts.

Step 3 — Start with ETFs. Before picking individual stocks, get market exposure through ETFs like the Satrix 40 (JSE Top 40) or Satrix World (global equities). You get instant diversification and don't need to pick winners.

Step 4 — Learn before you stock-pick. When you're ready to pick individual stocks, write a thesis for every position. Compass is designed for exactly this — it forces the discipline that separates long-term wealth builders from gamblers.

Step 5 — Be patient. Compounding takes time. R1,000/month at 15% annual return for 20 years becomes R1.5M. The strategy is not the hard part. Staying the course is.

"The stock market is a device for transferring money from the impatient to the patient." — Warren Buffett

P/E Ratio — Price divided by earnings per share. Simple and widely used. A P/E of 15x means you're paying R15 for every R1 of earnings. Compare to sector peers and historical averages. Works best for stable, profitable businesses.

DCF (Discounted Cash Flow) — Projects future cash flows and discounts them back to today's value. Most theoretically correct. Most sensitive to assumptions. If you're wrong about growth rates or discount rates, the valuation swings wildly. Use it as a sanity check, not gospel.

EV/EBITDA — Enterprise Value divided by earnings before interest, tax, depreciation, and amortisation. Better than P/E for comparing companies with different capital structures or tax situations. Common in M&A analysis.

NAV (Net Asset Value) — The book value of assets minus liabilities. Most relevant for banks, REITs, and holding companies. A bank trading at 0.8x NAV may be cheap — or it may have bad assets. Know which.

Dividend Yield — Annual dividend divided by share price. 6% yield means R6 per R100 invested annually. Works for income investors and mature businesses with stable payouts. Watch the payout ratio — is it sustainable?

P/Book — Price relative to book value per share. A P/B below 1 means you're buying assets for less than their stated value. Classic Graham territory. Common in banking and property sectors.

No single method is right. The best investors triangulate across multiple methods and use the result as a range, not a number.