Projection/protection: Weighting/waiting

Projection/protection

A recent extended interview between William Green, author of Richer, Wider, Happier, and Jason Zweig, annotator of the most helpful 2003 edition of Benjamin Graham's The Intelligent Investor, reminded me of Graham’s distinction between two kinds of investing disposition: projection and protection.

Projection is the attitude of the future-oriented growth investor, inclined to focus on the upside, to ask, What could go right here? The Scottish Mortgage investment trust being perhaps the best-known and - as of early 2022 - struggling example in the investment trust world.

Protection is motivated by a concern for the downside, concerned to ask prior to any commitment of capital: What could go wrong here? The Ruffer Investment Company, and Capital Gearing Trust being examples of this protective style.

Weighting/waiting

A further distinction came to mind when reflecting on this interview: the importance of weighting and waiting in making investment choices.

Investment success depends not just on deciding what to invest in, but how sizeable a portion of one’s portfolio should be committed to any one investment (weighting); and patience, for how long are you prepared to wait for the desired returns in each case?

The balance between projection and protection, and considerations of how heavy a weight and how long a wait you're prepared to entertain for each investment held are useful ways of framing capital allocation decisions.