Most professional investment managers will never admit it, but there’s a lot of luck involved in investing. Now, I’m a firm believer that we create our own luck through preparation and positioning. But the final results? They’re out of our hands. The market determines the outcome, and whether good or bad, there’s always luck involved.
When markets are making new highs, you see a lot of chest-pounding on social media and even from some investment professionals who should know better. In some ways though, it’s natural. Making money is exciting. And if we can’t celebrate the good times, what are we even doing here?
But when things are going well for us, we double our efforts to look inward.
We don’t celebrate the profits. We celebrate the processes we’ve followed to get to this point. The intuitive hunches we’ve trusted. The bad habits we’ve managed to quell. The discipline we’ve maintained when emotions were screaming at us to do something. Anything. Even if it’s stupid.
More than being a genius, it’s likely we’ve simply been diligent about sticking to our plan. We’ve been course-correcting when our instincts kicked in. We’ve sized holdings of shares appropriately. We’ve painfully cut out losses when necessary and let our winners run when the setup called for it. Modern Portfolio Theory after all is a theory.
Our processes are the things we celebrate and continually strive to improve.
Because here’s what we know after nearly four decades following investment markets: the profits are temporary, but the process is permanent. Good processes can weather bad markets. Bad processes will eventually blow up, even in good markets.
The market doesn’t care how smart we think we are. It doesn’t reward intelligence as much as it rewards consistency, discipline, and the ability to adapt when conditions change.
When we focus on our craft—really focus on doing the work right—the outcomes tend to take care of themselves. Not always in the short term, but over time, good processes compound just like good investments.
So by all means, we will enjoy the good times. Feeling grateful for the wins. But we will always remember what actually got us here.
It wasn’t luck. It wasn’t genius.
It was showing up every day, following our plan, trusting our instincts, and staying disciplined when the market and occasionally our clients, tested our resolve.
We will always celebrate the process, not the profits.
The profits are just our scorecard. The process is the prudential management of a clients life savings itself. It’s a privileged position we never take for granted.