The Lumen Way
 
Investing is putting out money today in exchange for a stream of future cash flow. Take rental properties as an example.  You spend money today to purchase an apartment, and then rent it out for rental income.  If the total rental income exceeds the amount you put out today, then you have made a successful investment.  This is what investing boils down to.  At Lumen, whether an investment is a stock, a bond, or a commodity, we appraise its "intrinsic value" by estimating the total cash flow it provides; and we purchase it when its market price is substantially discounted from its intrinsic value.

But investing is more than buying at a low price and waiting for the money to roll in.  Investing involves risks; and we take a number of measures to minimize them.  First, on the individual investment level, we believe that thorough research and objective analysis are our best protection.  Therefore, we carefully evaluate the merits of every investment before we purchase it.  Also, as mentioned, we purchase at discount.  The discount serves as a margin of safety.  It protects us from unforeseen events that erode the intrinsic value of our investments.  Then on the portfolio level, we reduce risks through diversification.  We believe that mixing different asset classes (e.g. stocks, bonds, commodities, and real estate), different strategies, different vehicles, and different geographic location lowers overall portfolio risks.  Also on the portfolio level, we avoid using debt to fund investment purchases. As Warren Buffett said about debt, “If you are smart, you don’t need it. If you are dumb, it will kill you.”  We agree completely.

Finally, investing requires discipline. Emotions often cause investors to act on a whim and veer away from long-term goals.  At Lumen, we invest for the long-term and are not easily distracted by short-term market fluctuations. We remain focused and rational in calm or turbulent times.

The end result of our approach is performance.  We have been applying our approach to  manage investment portfolios for over 10 years prior to founding Lumen Funds.  Our portfolios have outperformed the benchmark in terms of both appreciation and volatility.  But we are not resting on our laurels.  We recognize that complacency poses great threats to success.  So we strive to maintain our performance through humility and vigilance.