Time Allocation

How should a value portfolio manager allocate his time?  This is one of the most important questions in all of investing.  It has never been clearly addressed in an investment text or book describing the value investment process.

One reason it has never been addressed is that there is no clear answer.  Every investor will have his or her own style. However, just because there is no answer does not mean the subject should not be discussed.

Here is our best estimate of the optimum time allocation:

  • 30% – search for and doing a quick analysis of potential new ideas
  • 50% – digging further into potential new ideas that pass some initial hurdle
  • 10% – maintenance research on ideas in the current portfolio
  • 10% – day-to-day management, rebalancing, and monitoring of current portfolio

Obviously these are rough guidelines.  We could not argue with allocations that strayed by 10% from our guidelines.

In the real world it has been our observation that the actual time allocation of most professional investment managers is:

  • 10% – search for and doing a quick analysis of potential new ideas
  • 30% – digging further into potential new ideas that pass some initial hurdle
  • 30% – maintenance research on ideas in the current portfolio (this percentage tends to increase even higher when performance has been poor for a couple of quarters)
  • 30% – day-to-day management, rebalancing, and monitoring of current portfolio(for managers with a short time horizons, this can become an all-consuming 90% of their time just before they go crazy and leave the business)
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