Finding the best swimmers

Some of my notes have been getting rather lengthy. Here’s a list of one-liners. 

If you expect instant gratification from your investments you’re doing it wrong.

It’s easy to confuse low quality companies operating in favourable conditions with high quality companies. Only by looking at long term financials does the difference become apparent.

Great companies work over the long term. The absolute worst piece of garbage companies work in the short term. Both of these phenomena are caused by the same thing: the companies are moving closer to their long term value.

It takes time for investments to realize their fair value. Imagine watching a glacier move in slow motion. That’s what it feels like in the moment. Most people give up on good investments, but good investments rarely give up on people.

In the short term good companies can go down for no reason. And sometimes bad companies go up for no reason. In the long term good companies go up and bad companies go down.

Judging performance is like watching a baseball game. No one decides who the winner is after the first inning. Measure your expected long term performance using the longest term information you can find.

Everything reverts back to its average over time. Pick your ideal time frame and stick to it.

Companies issue financial results on a quarterly basis. Humans can experience over 10 different emotions in a minute. There is your opportunity. Consider how you might feel three years from now.

In the moment, being right feels exactly the same as being wrong. Confidence is high, and you believe in what you’re doing. The feeling of being wrong (grief, regret, etc) only surfaces after the realization that you’re wrong. Ignore confidence, ignore regret, and develop a habit of regularly doubting your assumptions.

Investing is not like driving a car. When you turn the ignition, the car turns on every single time. When you invest in companies over the long term, only about 51% of them will be up by tomorrow. Only 60% of them will work out over the next month. In the long term only 10-15% of them will generate the majority of the return.

The market spends 70% of the time below its peak value. You’re only making forward progress 30% of the time. To get the 30 you have to stick around through the 70.

Investing is about longevity. The best performing accounts at US mutual fund dealer Fidelity were people that forgot they had accounts, and dead people. The only thing they had in common was they left their investments alone to grow.

Don’t bother trying to predict the tide, it’s impossible. Focus on finding the best swimmers.

Ben Kizemchuk is a Portfolio Manager & Investment Advisor with Altus Securities Inc. in Toronto. He offers financial planning and investment management for high net worth Canadian investors. Ben focuses on the Growth and Income Portfolios and reducing tax.