Sometimes it’s better to be mixed in with the herd. You know, like when a bull is chasing you through the streets of Pamplona, you’re scaling Everest or swimming with sharks in the Great Barrier Reef.
But, when it comes to investing, it makes sense to head for your own island, all by your lonesome self. Warren Buffett once said it’s wise for investors to be fearful when others are greedy, and greedy when others are fearful. He’s making the point, the art of investing can be a lonely discipline. That’s right, I’m here to tell you, it can sometimes be good to feel lonely—at least when it’s comes to making investments.
Why is that? Well, you’re either looking to sell when an asset is still in fashion and all the rage—the talk of the town, or the Street in this case. Or, you’re looking to buy in when an asset is out-of-favor and being trashed, if mentioned at all. It could be a house just outside a desirable community or a business whose products/services are temporarily unfashionable.
If you’re right about your view, the market will eventually come around and discover what you already have. However, rarely do the markets prove you right overnight. Typically, you must endure at least some time on the island, where you feel all alone and looking around for company—which makes me think of Gilligan—only there’s no Skipper, Ginger, Mary Ann or any of the rest! Nope, you’re all alone.
It’s in those moments, that your conviction is tested. It’s just you and your perspective, gleaned through all you’ve heard, seen and read. Of course, at first, you’re jubilant at your discovery. You’re in a beautiful place. It’s warm. The sun is shining. But, over time, your food supply runs low, your water is depleted and your craving for company is feverish. That’s the time you want to capitulate even if nothing has changed with the fundamentals of the asset or your thesis. That’s the true journey of an investor—not the flashy overnight successes.
That’s why the most important discipline to investing is keeping an open mind and not letting the fear or greed of the crowd influence your own decision-making. If you’re successful investing like you’re on an island, you just might be able to someday mimic Sir Richard Branson and invest in an island as well!
Investing involves risk including loss of principal.