Philosophy of Great Investors II
“Be fearful when others are greedy. Be greedy when others are fearful.”Warren Buffett. Chairman, Berkshire Hathaway
Don’t Let Emotions Guide Your Investment Decisions
Great investors throughout history have recognized the value of making decisions that may not feel good at the time but that will bear fruit over the long term–such as investing in areas of the market that investors are avoiding and avoiding areas of the market that investors are embracing.
“The basic question facing us is whether it’s possible for a superior investment manager to underperform….The assumption widely held is ’no.’ And yet if you look at the records, it’s not only possible, it’s inevitable.”
Robert Kirby. Founder, Capital Guardian Trust Company
Recognize That Short-Term Underperformance Is Inevitable
Almost all great investment managers go through periods of underperformance. Build this expectation into your hiring decisions and also remember it when contemplating a manager change.
“The function of economic forecasting is to make astrology look respectable.”
John Kenneth Galbraith. Economist and Author
Disregard Short-Term Forecasts and Predictions
Don’t make decisions based on variables that are impossible to predict or control over the short term. Instead, focus your energy toward creating a diversified portfolio, developing a proper time horizon and setting realistic return expectations
“You make most of your money in a bear market, you just don’t realize it at the time.”
Shelby Cullom Davis. Diplomat, Legendary Investor and Founder of the Davis Investment Discipline