Why Smart Investors Start by Admitting What They Don’t Know
After 30 years of managing money and studying other managers, I've learned that no one beats the markets. You can only use them to achieve your own personal objectives.
Sadly, many advisors prioritize their short-term needs. They claim to be smarter than most. They might be, but I haven't seen a money manager beat the markets consistently when factoring in their risk. Almost all of them struggle with their performance, yet they still assure clients they are capable.
A Better Approach
I've had more success with well-diversified portfolios. They can handle market downturns better. Here’s how we evaluate our portfolio:
- We look at how it performed in previous crashes.
- We ask ourselves an important question:
- Can I mentally and emotionally survive such a drop in the future?
In other words, will I stick to my strategy even when my portfolio is down, and the news is saying the end of the world is near? Our confidence comes from our broad diversification. I mean owning 10,000 companies globally, with none making up over 1% of our portfolio. With such a portfolio, the fear of “losing it all” disappears in all but the most extreme scenarios.
…They Just Don’t Know!
When you hear “experts” say to invest a lot in one stock or avoid another, remember they don’t really know.
What About You?
So, what do you think? Have you ever invested based on a “tip” that worked out? How about tips that didn’t pan out? Would you accept what the markets provide if it helps you reach your personal goals?