The Route to Performance
I dislike dieting. I hate the crowds in the gym every January. Both eventually wane. Too much, too soon.
I like lifestyle changes that are permanent and sustainable. And I like the idea of compounding that over an entire lifetime.
The same can be said about investing. From Howard Marks:
"If you go back to the first memo, I think it was called The Route to Performance and it was 1990. So what happened is that I ran into a client and he explained that he'd been managing this portfolio for 14 years and he'd never been above the 27th percentile or below the 47th percentile. That is to say, he'd been solidly in the second quartile every year for 14 years in a row. And where do you think that put him for the 14 years overall within his competitive universe? 4th percentile. In normal life, we say, well, if you range from 27 to 47, where are you on average? About 37. And the answer in his case was 4. The reason being that in investing most people eventually shoot themselves in the foot and that he had been able to eliminate all bottom half observations. And by being in the top half for 14 years, he was in the top decile for the whole period."
Historically, the compounding from being consistently decent over time puts you in the upper echelon of investors. There's no need to chase or overemphasize recent performance. Simply staying in the game will be your best bet to be great.
Don't buy a new Peloton if it's going to be drying rack in six months. Start going for walks regularly.
Don't invest in something that could blow you up in a year. Start with a balanced fund.
As Marks notes, "The only thing that matters is where you are for the long run. You don't get there by swinging for the fences."
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