Investment Consistency

Our long term clients often ask us how we manage to deliver such consistent investment returns. We tell them that consistent returns usually follow a consistent approach.  We never forget the following;

  1. Understand there is no return without risk. Rewards only go to those who take risk. However it’s simply not true that the highest rewards go to the individuals who take the highest risks.  Many high risk investors are wiped out completely.  I believe there is substantial luck needed to make substantial returns and nobody is lucky forever.
  2. Continue to build on experience. Risk is measured and managed by people, not by mathematical models.  History is our biggest asset.  Only by understanding our past can we hope to know our future.
  3. Understand we cannot know everything. But more importantly, try to know what you don’t know. We always question the assumptions we make and we never accept at face value facts given to us by interested third parties. As Donald Rumsfeld famously said. “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know”.
  4. Remember the only free lunch in investment is through diversification. Multiple risks will produce more consistent rewards in the long term.  We never commit 100% to a “cannot fail” investment proposition.  Warren Buffett describes this as “never betting the farm on anything”.
  5. Keep the discipline. This is the boring and time consuming bit. A consistent and rigorous approach will beat a constantly changing strategy every time.  Discipline takes time and patience – more time and patience than most individual investors can maintain.
  6. Use common sense. It is better to be approximately right than precisely wrong.  Most investments that go wrong looked too good to be true to begin with.
  7. Repress fear and greed at all costs. Human investment greed is a trait which many seem blind to until it is too late. Investment fear makes it easy to delay making an important decision. But investment fear can also accelerate making a rash decision.
  8. Research continually. Even when things are going well it doesn’t mean it will continue.