Hi Reader,
The average equity investor earned ~17% in 2024. The S&P 500 returned ~25%. That is a difference of >800 basis points, the second-largest in a decade, according to DALBAR's 2025 QAIB report.
The average investor does stay invested for 20 years. They just made terrible timing decisions around when to go in and out of the market along the way. DALBAR's "Guess Right" ratio fell to 25% in 2024 - i.e. investors timed their moves correctly only one quarter of the time, tying a record low.
We have spent the past year recalibrating and expanding the investment process at Endurance Capital across Southeast Asia. That work forced us back to first principles, studying how the investors we respect most actually operate. Not what they say at conferences, but the systems they built and maintained over decades. What we found confirmed something I have observed repeatedly on the ground. The investors who compound well are not the ones with better information or sharper instincts, rather they are the ones whose process protects them when their instincts and emotions fail them.
This letter is about what that process actually looks like.
Most investors lose money to themselves
Morningstar's “Mind the Gap 2025" study (covering ten years through December 2024) reinforces the DALBAR findings from a different angle.
The study compares what mutual funds and ETFs actually returned over the decade (i.e. their total return of ~8% annually), against what the average dollar invested in those same funds earned after accounting for the timing of investor buy and sell decisions (i.e. the dollar-weighted return of ~7% annually). That >1 percentage point annual difference, caused entirely by investors moving money in/out of the fund/market at the wrong times, cost roughly 15% of their funds' total return over a decade.
On that note, closer to home, it’s quite an informative experiment to try on your own portfolio: check what it looked like at the beginning of 2025 and what 1-year returns would have looked like if you did nothing vs. the returns you actually made from your reallocations during the year. Quite rarely do short-term reallocations add much value. More often the value-add is negative.
From The Behavior Gap by Carl Richards
The cognitive problem nobody is exempt from
If you stripped away the names and track records of the world's best investors and examined only their behaviors, what would you find in common?
They built systems that protect them from themselves
Nobel Laureate Daniel Kahneman's Thinking, Fast and Slow remains a clear and holistic account of how and why intelligent people make systematically poor decisions under uncertainty - and how experience and a high IQ usually don't fix it.
Thinking, Fast and Slow, Daniel Kahneman. Image: Goodreads
Recency bias. Overconfidence. Narrative fallacy. Loss aversion. The pull of social consensus.
Every analyst, portfolio manager, and CIO is subject to them. We have seen this in our own decision-making and investing as well. The times we got hurt the worst were not when our analysis was wrong. They were when our analysis was right, but our process allowed us to slip and act on basic irrational human instincts like “fear” and impatience instead. The investors who compound at >15% per year over decades have all, in different ways, built process architecture that systematically restrains and contains their own worst instincts rather than relying on willpower to override them.
Howard Marks made this point again in his February 2026 memo "AI Hurtles Ahead": even as AI transforms how we process information, it remains weakest in "dealing with novel developments where there's not enough prior experience for dependable patterns" and in "exercising taste and discernment." These are the exact capabilities a disciplined investment process is designed to protect.
What we can conclude from studying the best
Going back through the primary sources, the actual written frameworks rather than conference sound bites, a clear, recurring architecture emerges. We have organized it into four pillars, each one also grounded in what we have seen work in practice at Endurance Capital and across our region.
1. Write before you decide
Every major capital allocator we have studied has some version of this.
Warren Buffett's owner's manual at Berkshire Hathaway is perhaps the most elegant example. Many great timeless principles stand out in that manual: conservative use of debt, per-share value creation as his only scorecard, and treating shareholders as partners rather than a price audience. However, the deeper point is that all of it is written down. Every rule, every commitment, every constraint. Not randomly recalled from memory at the moment of decision, but instead codified in advance so the decision is already half made before the emotions and the pressure arrives.
Warren Buffett. Photo: Wikimedia Commons
Berkshire's 2025 annual report shows a compounded annual gain of ~20% from 1965 to 2025, versus ~10% for the S&P 500.
Howard Marks built his edge around the same discipline: writing investment memos since the 1990s. In October 2025, he published "The Best of...", marking 35 years of his memo practice.
"Don't just do something; sit there. Think more. Trade less."
— Howard Marks, 'What Really Matters?' memo, 2022
Marks also highlights that he appreciates putting “uncomfortable reflections” on paper. Only when they are uncomfortable to write are they non-consensus enough and/or constitute true learning.
At Endurance Capital, every position we enter (or exit for that matter) begins with a written decision memo. The discipline of writing forces a level of clarity that conversation and mental modeling alone cannot reach. The coherence or dissonance in your thinking only becomes visible when you commit the reasoning to paper.
Practically, for any professional or even amateur investor, this means staying unusually disciplined in putting down our investment rationales on paper prior to investing. Something basic like a one-page decision memo for every meaningful decision does most of the job:
- The investment thesis in four sentences
- A variant perception (i.e. what is the market getting wrong about the current price of this stock/security)
- A downside case
- Three to five conditions that would tell you the thesis is broken
This also comes with the added benefit of being able to do a post-mortem analysis on every investment made. Good or bad doesn’t really matter - the key thing is to be able to recurrently improve your process on the basis of this memo writing.
2. Make fewer decisions and hold them longer
Bill Ackman at Pershing Square runs eight to twelve core positions, adding one to three new investments per year at most. That constraint forces the entire organization to orient around depth over throughput.
The 2026 Annual Investor Presentation (February 2026) shows the results. Pershing Square has compounded at ~23% annually versus ~14% for the S&P 500. The top five holdings represent >70% of the portfolio.
This matches what I have observed across every successful long-term investor in emerging markets. The ones who generate genuine alpha are not running 50-position portfolios screened from Bloomberg terminals in London. They hold a small number of companies they understand deeply, and they stay through the volatility that flushes out everyone else.
Lee Freeman-Shor, a researcher, writer, and fund manager ranked among the world's top in the Citywire 1000 Report (2012), AAA-rated by Citywire, gold-rated by S&P Capital IQ fund research, and Bronze rated by Morningstar, studied this pattern extensively in The Art of Execution. His core finding is that with the same investment idea, the outcome is largely determined by behavior after entry, not the quality of the original thesis. Investors who doubled down at lower prices on high-conviction ideas massively outperformed. Those who cut quickly on short-term weakness consistently underperformed.
The Art of Execution, Lee Freeman-Shor. Image: Goodreads
3. Think about the downside before the upside
The vast majority of the truly great long-term investors run a downside-first mental model. Not pessimism, but sequencing. Before asking, "how much can I make?" ask, "can this company survive 12 to 24 months of severe stress without needing cooperative capital markets?"
Seth Klarman at Baupost built an entire firm around this. His letters make clear that when nothing is compelling enough to buy, he holds cash. Every dollar committed to a mediocre idea is a dollar unavailable when a genuinely good one appears.
"In the absence of appropriate opportunities, we will hold increased levels of cash. We will seek to focus on low-risk investments while emphasizing capital preservation."
— Seth Klarman, Baupost Group Letters
The math reinforces the intuition that a 50% drawdown requires a 100% recovery just to get back to flat. Avoiding large permanent losses is one of the highest-return activities in long-term investing.
In emerging and frontier markets, where we operate at Endurance Capital, we have seen this principle save portfolios more than any other single discipline. A company with a high-quality business with strong market share and a structurally sound balance sheet, bought at a valuation that requires no heroic assumptions, will weather the storms that test conviction. The companies that require benign conditions to survive consume disproportionate attention, generate losses, and crowd out the positions that would have compounded.
4. Protect your thinking time
Charlie Munger described Buffett's daily schedule in his 2007 USC Law School commencement address:
Charlie Munger. Photo: Tagesschau
"Half of all the time Buffett spends is sitting on his ass and reading. They are learning machines; they go to bed every night a little wiser."
— Charlie Munger, USC Law School Commencement Address, 2007
This is consistent with what Philip Fisher described in Common Stocks and Uncommon Profits decades earlier. Fisher built his entire research process around what he called "scuttlebutt," a structured system of primary conversations and deep reading before making any investment decision. His point was that the quality of thinking time determines the quality of investment outcomes and that most investors systematically underinvest in it. David Swensen made the same observation at Yale. The endowment's edge came from spending more time on fewer decisions than anyone else in the market was willing to.
I restructured my own week two years ago around this principle. The change was not adding more research hours. It was removing the fragmentation. Blocking full mornings for reading and modeling, moving all/most calls and meetings to two days, and treating the research blocks as non-negotiable. I encourage you to try it for yourself - the quality of investment decisions improves measurably within months. Not because you become smarter, but because you give yourself the space to think through what you already knew.
One of the biggest enemies of the investment process is calendar fragmentation. When thinking time is broken into 30-minute windows between calls, you cannot build the investment case conviction that can hold when a stock sells down 30% or more.
Why process counts even more in S.E. Asia
This is where I want to spend the most time, because it is where we have the most direct experience and where we believe the argument has the most practical consequence.
The process advantage is structurally larger in less efficient markets.
In US large caps, sell-side coverage averages roughly 18 analysts per listed company (FactSet Earnings Insight, Q4 2024). In emerging and frontier markets across Southeast Asia, that number is often 2 or less. Frequently zero.
What that means in practice is that the information environment rewards effort differently here. A serious investor who spends more than 6 months on due diligence for a single mid-cap from the region - reading its annual reports, meeting the management team repeatedly, mapping the shareholder structure, and understanding the regulatory environment will arrive at a level of understanding that no one else in the market has. In the US, that same effort gets you to roughly the same conclusion as 17 other analysts.
I have watched this play out over 15 years. The best investments we have made at Endurance Capital were not the ones where we had a better view on the macro or a cleverer valuation model. They were the ones where we had done the primary research process work that nobody else was willing to do and then had the conviction to hold when the market disagreed.
The opposite is also true. We have watched many smart investors come into Southeast Asia with good instincts and burn through capital because their primary research process was weak. They found the right idea, sized it up on excitement rather than conviction, and sold it at the first political headline when the thesis was entirely intact. The information advantage is only as useful as the process that uses it.
We regularly come across companies across SEA trading at single-digit earnings multiples, compounding profits at >20% per year, with net cash and >15% ROIC, and with zero institutional coverage. The governance was improving, and the capital allocation was disciplined and rational. The reason the stock was cheap was not because anyone had analyzed it and decided it was fairly valued. It was because nobody had analyzed it at all. That is the opportunity that process unlocks in this region, and it does not exist in markets where 18 analysts are already covering each company.
Global institutional capital remains structurally deeply underallocated to these economies. A theme I have written about at length in previous letters. The investors who take the time to build the process to operate here will compound. The ones who treat it as a tactical allocation based on macro signals will continue to buy high and sell low, the same pattern that DALBAR documents every year in developed markets, except with larger swings.
What I take from all of this
The investors I have studied and the ones I have worked alongside in this region share one trait: they built a system before they needed one. They wrote the rules when they were calm, so the rules would hold when they were not.
We are still refining the process at Endurance Capital. I expect we always will be. The version we run today is better than the one we ran three years ago, and the version three years from now will be better still. At the end of the day, that is the compounding I care about most - the compounding of the decision-making system itself.
If there is one thing worth taking from this letter, it is this: sit down and write your investment process on paper. Not your portfolio. Not your positions. Your process. The rules you follow before you decide, the conditions under which you act, and the triggers that tell you when to walk away. If you cannot write it clearly, you do not have one. If you do not have one, the DALBAR data tells you exactly what happens next.
Christopher B. Beselin
Investing, compounding & exiting
Christopher B. Beselin - is the Chief Investment Officer of Endurance Capital. The views & opinions expressed in this newsletter is for informational and educational purposes only and should not be considered investment advice.
PS. If you are a qualified professional investor and want to think through how to structure long-term Southeast Asia exposure with an active ownership lens - feel free to schedule a 1-to-1 emerging market strategy call with Christopher B. Beselin via this link. DS.