The given thesis helps investors to set realistic goals for their investments. Furthermore, it measures whether these objectives have been met or not. This thesis normally exists in a written form, however, even being just an idea it can’t be less effective. A properly composed investment thesis will serve a solid foundation for an extremely profitable portfolio, while a wrong thesis will most likely generate devastating losses.
Let’s assume an investor buys a stock based on his thesis that this particular stock is undervalued. Then the thesis suggests that the investor should hold this stock for a couple of years as a powerful surge of its value is getting closer. Exactly at this point, the investor should sell his stock to get his deserved revenue. That’s a simple example of aninvestment thesis.