A case study in just how easily the media’s headline predictions and warnings can mislead is attached in the essay below. In this essay, Weston Wellington reveals the difficulty of achieving superior investment performance by connecting the economic and financial news dots from 2014.
In an above-average, Lake Wobegon world, financial news would give us a leg up. The reality is that most of what passes for news has been anticipated or acted upon by a lightning-fast trader. This “news” offers no advantage. Better to think like Warren Buffett: have a strategy and exercise patience in executing it. A few pithy Buffett quotes illustrate the idea:
Lethargy bordering on sloth remains the cornerstone of our investment style. – 1990 letter to Berkshire Hathaway shareholders.
Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. BusinessWeek – June 5, 1999.
We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children. – 1992 letter to Berkshire Hathaway shareholders.
Patience is required when it comes to implementing the tools and tactics outlined by Vanguard in their paper on advisors’ best practices. Finding Your Inner Investment Alpha Dog for 3% Extra Performance summarizes this paper. Feel free to take advantage of our complimentary investment review. Otherwise, paraphrasing Weston, “resist the urge to dip and dart in response to the cascade of news events and opinions that suggest action of some sort is imperative for financial success.”
This blog entry is distributed for educational purposes and should not be considered investment, financial, or tax advice. Investment decisions should be based on your personal financial situation. Statements of future expectations, estimates or projections, and other forward-looking statements are based on available information believed to be reliable, but the accuracy of such information cannot be guaranteed. These statements are based on assumptions that may involve known and unknown risks and uncertainties. Past performance is not indicative of future results and no representation is made that the stated results will be replicated. Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Copyright © 2015, Granite Hill Capital Management, LLC.