InvestorQ : What is the process of writing a narrative on an investment portfolio?
Dia Deshpande made post

What is the process of writing a narrative on an investment portfolio?

NISHA Nayak answered.
1 year ago

At some point in history, portfolios were constructed via storytelling. Once built, they were marketed via data. Now, portfolios are carefully constructed via data. Once created, they are marketed via narrative story telling. It is basically interpreting the numbers and formulating stories based on those numbers. Aswath Damodaran, NYU professor teaching valuation, emphasizes on the need to create a story based on data available. Since creating a narrative is more art than science, there is no one-size-fits-all formula to doing it. However, there are a few things that portfolios with engaging narratives have in common. The first thing an investment thesis must communicate succinctly, but powerfully, is the investment opportunity. Every investor is focused on this and what it can offer to help fulfil their investment goals. 

In most cases, the allocator is looking for something beyond performance, often unique research perspectives or knowledge transfer. In these areas, the quality of the story is paramount. The next step in telling the story is conveying the chosen investment strategy to take advantage of the opportunity. Here it is vital that a manager can articulate a strongly differentiated edge. It is impossible to overstate the significance of getting this concise, clear and convincing. All these points imply a broader story, ostensibly filled with unique insight into the future performance of a company, and more importantly, its stock. If only you understand the described story as it unfolds, you could use this to your advantage when making stock selection decisions. Theoretically, anyway. Most investors really are looking to unlock a story. Increasing competition for capital and heightened demands on allocators’ time makes a logical and convincing story essential to help your portfolio stand out from the crowd.