Wisdom of a Investment Analysis Checklist

Charlie Munger is famous for his "mental model" approach to investing. As part of that, he has recommended that investors have a list of those issues which are pertinent to an investment decision. By identifying the correct answers, he views that a "mental model" is generated which should lead to higher quality decisions. Mohnish Pabrai, another well-known investor, takes this a step further. By emulating the airline industry, he recommends the development a checklist generated by past mistakes. He groups these errors into five "buckets." These "buckets" are made up of 97 specific questions. He does not identify these, but he does reveal the buckets. They are: leverage, management issues, "moat" issues, valuation and personal preferences. The advantage of Pabrai's approach is that it incorporates a less cerebral, more investment specific discipline. The buckets he has identified are replicable with each investor able to fill those buckets with specific questions related to errors of others or himself.