One of the biggest challenges with investing is applying a consistent and logical approach without the influence of your current emotions. We think of long-term investing in years or even decades, but in real time, we are investors every day. It takes many days of discipline to add up to being a successful long-term investor.
However, the principles for success in investing are similar to the principles many of us apply in other areas of our life, such as our relationships with others, our spiritual life, how we run our businesses, and how we raise our children. We are guided by a set of principles that we develop through a combination of past experiences, research, and things we were taught. We do our best to apply those principles consistently day by day in the varying environments we find ourselves. Our principals will likely evolve a bit over time as we encounter new life circumstances and receive data we didn’t have before.
Let’s think about raising children. As a parent, you might have a certain philosophy that you are trying to apply day in and day out, but each day you might execute your philosophy a little differently based on your child’s behavior and situation. For example, one day you may need to be more empathetic, another day more stern, and another day more fun-loving. But you generally don’t take extreme measures in reaction to short-term circumstances. If your 9-year-old neglects a chore, you aren’t going to kick them out of the house. However, you are going to adjust your approach based on the circumstances surrounding your child not getting the chores done on time. Is not getting the chores done on time a recurring issue for your child or is it an occasional occurrence?
With investing, it makes sense to follow a similar approach. At Master’s, there are a set of principles we use to guide our investment decisions, but that does not mean we stand still. In fact, your portfolio is being adjusted every single day to reapply our investing principles to an ever-changing investment environment. Just like parenting without taking extreme measures, we will modify the application of our philosophy based on the varying investment market environments. We are going to adjust our portfolios without ‘kicking them out of the house’. We will be steady but not stand still.
Where else do you see investing mirroring other life principles?