Being “first’ to something isn’t as important as being right.
If history has taught us anything it’s that the more you overcome, the more you can overcome.
In the moment, it’s hard to understand why we go through hardship. Only years later after you’ve persevered, do you look back and realize the obstacle or struggle you faced was preparing you for something greater. If history has taught us anything it’s that the more you overcome, the more you can overcome.
Your investing strategy is a result of what you learn through reading and mentors combined with your past experiences. Often times experiences from your past (even non-investment experiences) can shape the type of investor you will ultimately become.
A few years ago, I lost my mother in a freak accident. One day she was here and the next day she was gone. After the accident, I spent a lot of time reflecting on her life and how she made me a better person. She was a great mother to my sister and I, and a great wife to my father. Her strengths were abundant and obvious, and I try my best to live my life like she is looking over my shoulder. Interestingly, one of the greatest impacts she had on me professionally wasn’t through her many strengths… but through her one weakness.
Worry. My mother was a worrier. Although it improved later in her life, my mother worried- about seemingly everything- during my childhood and teenage years. As a child, this wasn’t something I recognized because, well… I was a kid. However, as a teenager I started to notice her worrying and it started to impact me. I loathed the fact that she worried so much about so many things. When a person is exposed to a set of behaviors over the course of several years, you consciously or subconsciously assume those behaviors or go in the complete opposite direction.
Me? I went in the opposite direction. I didn’t worry about anything. This wasn’t to say I was reckless. Instead, it was more of a choice that I made to focus and work hard- but not worry about the outcome.
This mindset would ultimately impact my approach to investing. This isn’t hubris disguised in a thin veil of humility, but I’ve always had the ability to “bet big” when I found a worthy investment. I have no issues holding 50% of my net worth in two positions. I can sleep at night. Many people cannot. In the end, as long as I know my positions better than most, I don’t waste a lot of time worrying about the outcome. When I sit on the proverbial “psychologist’s couch,” I know that my mother has played a big role.. in a good way. The years of witnessing her worry ultimately produced a strength to bet big on my convictions.
You may also have stories from your past that have developed you into the investor you are today. I’ve found it’s best not to fight it, but lean into it. Embrace it.
Early in my investment career, everything I read preached the need for diversification. I thought maybe I did have it wrong, so I entered a phase where I genuinely attempted to be more diversified- and owned fifteen companies of equal proportion. This phase of diversification lasted a whopping 30 days.
It drove me insane.
There were always 4-6 businesses of the 15 that I really believed in more than the rest. I recall the regret I felt when realizing how little I would make if one of these 4-6 “high conviction” positions did really well. If a 7% position would triple, it would have a 14% effect on my overall portfolio. This didn’t seem like a really good return for being right. Sure, I could own 15 positions with unequal weighting, but then I would have a few 3% positions in the portfolio. What’s the point of that? I might as well just hold cash or own more of what I like most. My diversification experiment didn’t last long because it wasn’t who I was and didn’t give me the peace of mind that others promised it would.
But- this isn’t an article about concentration vs. diversification. This also isn’t an article about how you should invest like me because everyone does it differently.
Buffett does it his way while Schloss did it another way. Ichan does it his way while Lynch does it another way. Tepper does it his way while Andreessen does it another. Some are long-term. Some are short-term. Some are value. Some are growth. Some are activist. Some bet on change. Some bet on things that won’t change. The greatest investors ever have opposing strategies. Within the world of “value investing” alone, there are hundreds of successful iterations. If every value investor was investing the exact same way, it would be the most crowded trade around–which is rather ironic when you think about it.
Just like the way water flows into a depression, as you mature as an investor- lean in to what you’ve learned from past experiences– and you will find your niche. Use caution when mimicking the investment styles of others, as it may not be the right one for you. You can do it your own way and be successful. Having peace of mind is powerful and it’s one of the small things that has made a big difference in my returns.
You can read Part One of Small Things that Make a Big Difference [HERE].
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Being “first’ to something isn’t as important as being right.
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Mentors don't have to be perfect, they just have to teach you something.