Quote for the Week
It’s important to recognize what I call the twin impostors. They are short-term gain or outperformance, and short-term underperformance. Both are impostors, because neither one says anything about real investment skill. Investing performance is what happens when events collide with an existing portfolio. Maybe a portfolio has been assembled very wisely, very prudently, and with a lot of analytical talent, and the events that occur just were unforeseeable. That doesn’t mean the performance that results tells you anything about the wisdom of the portfolio or the ability of the investor.
I refer a lot to The Black Swan, which is an excellent book by Nassim Nicholas Taleb. Here are a couple of points, or my characterization of points that he makes. Investors are right and wrong all the time for the wrong reasons. We all know people who got famous in our business for being right once in row. The correctness of a decision cannot be judged merely from the outcome. Good decisions fail all the time. Bad decisions work all the time. Randomness alone can produce just about any outcome in the short run. It is for reasons like these that we must be leery about attaching great importance to short-term performance. — Howard Marks (source)
From the Archives
Last Call
- Finding A Signal Amidst the Noise – Net Worthwhile
- How Social Media Steers Investors Toward the Wrong Side of Anomalies – L. Swedroe
- Story-Telling Animals – Klement on Investing
- The Safe Assets: 150 Years of Bonds and Gold Across Sixteen Countries – Beyond Passive Investing
- The Index Fund Turns 50: How Jack Bogle Changed Investing Forever – A. Roth
- A Billion Dollars – K. Kelly
- The Death of Expertise – Sensible Medicine
- Explain It to Me Like I’m Ten – T. Harford
- How the Strategic Petroleum Reserve Works – Construction Physics
- The 30,000-Mile Fish Finger – Material World