Don’t Compare Yourself To Others

This article by Ian Cassel is particularly useful reminder in bull markets when everyone starts talking about their investment returns. Cassel quotes Howard Marks. “To be a disciplined investor you have to be willing to stand by and watch other people make money on things that you passed on”. This quote is brilliant because it strikes a chord in each one of us. We’ve all been there. Maybe you are there today, watching someone else do well in something you passed on. It all relates back to comparisons, and comparisons are unproductive and corrosive. We all invest differently. Don’t compare yourself to others. You aren’t running their race. Compare yourself to yourself two years ago.

Extraordinary returns follow extraordinary discipline. An investor’s goal should always be to make as few investment decisions as possible. This means you are going to pass on many investments that will ultimately do well without you. Experienced investors should openly accept this. Why? Because doing well in something you shouldn’t have invested in doesn’t teach you anything. It means you got lucky.

Howard Marks writes that to be a successful investor you have to have a philosophy and a process you believe in and you can stick to even when the times get tough. This is very important. If you don’t have courage of your convictions and patience and toughness, you can’t be an investor. Absence of these qualities will constantly drive investor to fall in line with the consensus by buying at the top and selling at the bottom.

But, it’s important to note that no approach will allow you to profit from all kinds of opportunities or in all in environments. You have to be willing not to participate in everything that goes up. Invest only in the things that fit your approach.  The truth is, however, one of the most corrosive of all the difficult human emotions is the feeling of having to sit by and watch other people make money. Nobody likes that.

To be a disciplined investor you have to be willing to stand by and watch while other people make money that you passed on. You don’t have to invest in everything. You don’t have to catch every trend. You should invest within yourself, in the things you know about and stick to it. Every investment approach, even if skilfully applied, will run into environments for which it is ill suited. As a result, even the best of investors will have periods of poor performance. Nobody performs great all the time. In order to be able to stick with an approach or decision until it proves out, which can be a long time; investors have to be able to weather periods when the results are embarrassing. This can be very difficult.