Ian Cassel writes an article suggesting that investors stop comparing themselves to the best performer of the year or quarter or even a decade. Comparisons can be destructive because the pain of underperformance is far greater than the joy of outperformance. When you underperform you are comparing the worst of who you are against the best of everyone else. It’s just stupid and unproductive. In addition, when you underperform you feel the extra nudge to “do something”, to break away from your strategy and convictions – to chase short-term performance. You chase things instead of letting the market come back to you.
Howard Marks reminds investors that every investment approach, even if skillfully applied, will run into environments for which it is ill-suited. And that means that even the best of investors will have periods of poor performance. Nobody performs great all the time. And 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.
Compare this to the sport of cycling. The largest cycle tour in the world, most prestigious cycle tour is the Tour de France. It has been run for over 100 years. It’s never been won by somebody who won every stage. And it’s never going to be won by somebody who won every stage. In fact, on a number of occasions, it was won by riders who never won a single stage. The first time they ever stood on the podium was when they were getting the race prize.
So the reason Cassel is telling us all this is this: He thinks when people are looking at investments seek a fund manager (or become an investor) who can outperform in all market conditions and all reporting periods. There is no such human being.
As an investor, we’re trying to win the Tour de France. We are not trying to win every stage. Any rider who tried to win every stage would fail and fail to win the Tour as a result. You have to be good at something and get your colleagues and the team to carry you through the bits that you’re not to get the best long term result.
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