Philosophy: Investing philosophy is the set of underlying beliefs that will drive the investment approach. For instance – Value investors will invest only when the valuations are reasonable, contrarian investors will do the opposite of the crowd, technical investors will invest based on the charts, Black swan investors will take bets on extreme events and expect a high pay off when such events happen etc. All these philosophies give a lens from which one can view the market, its participants, and spot profitable opportunities. All of these have blind spots and caveats that need to be well understood to be successful.
Process: Process is the framework that is evolved to put the philosophy into practice. This involves methods used for identification of opportunities, tools to review current investments, frequency of review, feedback loop etc. Though the “process” seems/feels mundane – it is one of the key aspects of successful investing. All the philosophies can be made to work if there is a good process and the greatest philosophies will fail if the process is subpar.
People: Just like in any other aspect of life, investing also needs right kind of people to succeed. When we talk about people, this is less about the intellect and more about individual discipline. Very few geniuses have been great investors, whereas all the great investors have (and had) a disciplined approach to investing.
In summary – Philosophy drives the investment strategy, Process gives the framework for executing the strategy and People are responsible for understanding the strategy and exercising discipline in executing the strategy. All these 3 P’s are essential for investment success.