Institutional investing, as it is structured today, simply makes it more difficult to make a high-conviction, long-term decision than to make a low-conviction, short-term decision. The rewards of short-term results substantially superior to the market, and the penalties of short-term results well below the market, are awesome.
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There is one law I believe in, which I call elasticity. That is simply an intuitive non-scientific term for the law of regression to the mean. What goes up does not have to come down, but what goes up a lot more than everything else, frequently has to lay fallow for a long time while much else catches up.
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Cash really hurts if you hold it very long in an equity market that is compounding at close to 20% per annum.
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For social and sentimental reasons, people have a propensity to want to do really dumb things from time to time.
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I think you have to be an undying optimist, and perhaps a Pollyanna to enjoy and to be successful at managing common stock portfolios over a long period of time.
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One thing all of us know for sure is that the stock market doesn’t go down just because a lot of folks think that it has entered the heart of looney land.
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To beat the market is not easy. In addition to a good investment manager, the investor needs perspective, patience, and courage — qualities that do not abound in today’s intensely competitive world.
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The investment counsel business, as it is traditionally practiced, and probably as it should be practiced, is a simple process of making sure that clients never have so much risk exposure that their capital or standard of living can be impaired by some specific negative surprise.
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