I periodically recycle old posts on my blog to ensure that new clients can benefit from valuable content they may have missed and this post is one such example.
Thousands of years ago, before the use of horses, Native Americans utilized a hunting technique that preyed on animalistic instincts. This technique was called the buffalo jump. Hundreds of buffalo could be killed at a time without the use of weapons.
Tribesmen would set up a path lined with piles of rocks and tree stumps, creating a “road” towards the cliff. Hunters would then frighten a lead buffalo in a herd onto the path and cause a stampede.
Stampedes are not unique to buffalo and happen with humans as well, even today. Psychological stampedes are more widespread than physical stampedes, though. The dot-com bubble was a psychological stampede. The run-up in housing prices prior to 2008 was a psychological stampede.
Stampedes (bubbles or manias) are a staple of human nature. We have a fear of missing out. We are greedy and fearful. Like the buffalo, we feel safer in the crowd. Sometimes it takes courage simply to be a bystander.
I have no interest in “going with the flow”. I could hold a view, position or cash for months (boring) before going for the “kill” (exciting). I follow a plan or system with complete fidelity. Most people want certainty. Sorry, I sell high probabilities. I have been, and will be, wrong on occasion. Nobody is perfect. It is far more likely that even when I am caught with my pants down, nobody will poke fun at me.
I get referrals from happy existing investors especially those who have been with me for more than 10 years and have seen life-changing returns in their portfolios, from time to time. Since I have added quite a few new clients, it is probably worth a reminder that I maintain a longer term (minimum 3-5 years and can be longer) views on all asset classes.
There is one principle that has served me very well over the years. It is about getting the big picture right and that is really the beauty of investing. It does not matter if you end up wrong in the short run.
It is not as easy as it sounds thanks to the noise that resounds daily from every direction. What noise? That includes the powerful financial news media and the shouts and hollers from the so-called experts. Most of the noise you hear out there focuses on short-term returns or even shorter time frames. Without some way of tuning out the noise, we are doomed.
We are all cheapskates and I know there is a ton of free information out there. I do not rely on anything that can be googled easily. What most financial sales people do is they take what happened yesterday and pin that out into the future. Honestly, we would like to make money all the time but we must have the maturity to adapt to new conditions which support potentially different outcomes.