Five Investing Powers

Rare and helpful:

Low susceptibility to FOMO. But for a different reason than you might think. The urge to buy an investment because its price went up means you probably don’t know why the price has gone up. And if you don’t know why the price has gone up you’re more likely to bail when it goes down. Most good investing is just sticking around for the longest time possible, through thick and thin. Quash the need to own whatever is going up the most and you reduce the urge to abandon whatever eventually goes down. Someone will always be getting richer than you. It’s OK.

Knowing what game you’re playing. An idea that’s obvious but overlooked is that investors on the same field play different games. We buy the same companies, read the same news, talk to the same people, are quoted the same market prices – but we’re everything from day traders to endowments with century-long time horizons. Even investors who think they’re playing the same game – say, stock pickers – have wildly different goals and risk tolerances. My view is that most investing debates do not reflect genuine disagreement; they reflect investors playing different games talking over each other, upset that people who don’t want what you want can’t see what you see. Understanding your game, without being swayed by people playing different games, is a rare investing power.

Recognizing the difference between patience and stubbornness. Two things are true: 1) every asset goes through temporary out-of-favor periods, and 2) the world changes, and some things fall permanently out of favor. Industries go through normal cycles, then they die. Investing strategies work for decades, then they stop. Realizing that patience plays the most important role in investing, but it shouldn’t be used blindly in every situation, is so hard. Dealing with it requires a combination of conviction and flexibility that can feel like a contradiction. The trick – and that’s the right word – is realizing that some behaviors never change but the composition of the economy always does. Having a few immutable beliefs but even more that you’re willing to abandon is a rare investing power.

Comfortable being miserable. And let me define misery a few ways. Losing money can be miserable. So is the honest admission that your investment success may not have come entirely from skill. So is the inevitable doubt among your investors, co-workers, spouse, friends, and self during a stretch of underperformance. Realizing what’s out of your control can be miserable; recognizing how many risks exist that you had never considered can make you despondent.

The rare skill is accepting these pains vs. trying to avoid or deny them. There’s a scene in Lawrence of Arabia where one man puts out a match with his fingers and doesn’t flinch. Another man watching tries to do the same, and yells in pain. “It hurts! What’s the trick?” he asks. “The trick is not minding that it hurts,” the first man says. Comfortable being miserable. Same in investing.

Aligning your peak-wealth years with a generational collapse in interest rates, the Fed becoming comfortable with quantitative easing, and falling marginal tax rates. Plus the historical context of what it’s been like in other eras, which gives you an appreciation for what’s possible. A rare and helpful skill.


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