Your amazing SUPERPOWER over professional investors

It’s hot outside and I’m drinking gallons of water today. How about you?

Last year on one of the muggiest days of the year, I was invited to a dinner by a non-profit I’m part of. I really didn’t want to go.

London’s tube system is uncomfortably crowded most of the time and on a hot day it gets much worse. I was going to be a sweaty sardine.

However, there was the bribe of food from Yotam Ottolenghi. The name might sound strange, but his food is delicious - he uses pomegranate, sesame, chickpeas and middle eastern spices to create uniquely tasty meals. Yum.

Having been sold on the menu, I hauled myself uptown and through luck ended up spending dinner sitting next to one of the most senior people at one of the mega fund managers. I was massively intimidated but what to do - I made polite conversation about the weather like my mother taught me.

Well, the reason I’m showing off having spoken to this person is that our conversation eventually turned to career planning and staying with a firm for a long time. Taking the opportunity to find a career advice gem  I asked: “So how do you plan your future at your firm”. The reply “Given the financial industry, I never assume I’ll have my job more than 2 weeks ahead of time”.

This shocked the sandals off me. Being afraid of being demoted or fired was fine for a mid-level employee like me, but for a seemingly all powerful person who had dozens of famous fund manager’s under their command…. it made me truly realize that everyone in the investment management business is always being measured and judged. Even for the most senior people, the horizon is just a few weeks away.

Quarterly goals dominate every industry but in fund management they really are make or break. Investors will quickly leave a fund that appears to be dipping downwards.

Professional investors with a few exceptions are stuck making decisions for the short term rather than the long term.

They end up making the best short term decision for themselves rather than the best long term decision for YOU.

So turning back to YOU. If I’ve managed to keep you reading this far……

Most people investing money don’t really “need” it back for a horizon much longer than one quarter….

I’m hoping my kids will go to college and I’m hoping I’ll be able to pay for it. They aren’t even in school yet so investing for them I’ve got 14 - 17 years before I need to access this. Perhaps you’re 55 years old and reading this --- well you probably have another 10-20 years before you use the money you are investing today. Probably longer.

A total mismatch of needs. Professional investors are investing your money on a short term basis while you only need it for the long term.

So exercise your SUPERPOWER -- invest for the long term - it’s not a very crowded space.

Kryptonite

Unfortunately all superheroes have to watch out for energy sapping soul sucking KRYPTONITE

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You have an endless number of choices in investing your money -- you can buy and rent houses, invest in mutual funds (almost 9,000 to choose from in the USA alone), invest in China, invest in biotech stocks, buy a goat farm in Italy (I kid you not I’ve looked into this)… the list is endless……

I fall victim to this very often myself --- swimming around in circles, unsure what to do. Even Superman couldn’t resist the paralyzing effects of Kryptonite and it’s energy draining powers.

To recap:

  • Your investing superpower is being able to invest for the long term (3+ years) and not be constrained by the quarterly results demanded from many investing professionals. So when you find yourself cursing the financial industry and their boom and bust cycles -- remember you have a Superpower over even the best professional investors.

  • Your Kryptonite is the endless number of investing choices which could leave you confused and paralyzed. But you’re Super(wo)man. We’ll get you out. Anytime you find yourself getting stressed out about investing -- just remember it's the Kryptonite, not you.

Here are 3 habits that can give you a long term investing mindset:

  1. Don’t follow CNBC or the markets every single day. Yes, the stock market will go up and down many times in your lifetime. None of us know when or by how much. Unless you’re a full time trader -- start thinking of your investing as a long term game. I’m very careful with financial news. I try to care about where a price will be in 3 years or 5 years, not where it will be tomorrow.
     

  2. Read more analytical pieces rather than real time news reports -- The Economist is perfect as it gives you the week’s latest news looking back on it rather than following it as events unfold.
     

  3. Follow the writing of value investors who all should be long horizon investors. Peter Lynch’s classic One Up On Wall Street: How To Use What You Already Know To Make Money In The Market, “explains the advantages that average investors have over professionals and how they can use these advantages to achieve financial success.”

Enough lecturing for now. I hope you found that a useful perspective.
Have a wonderful week

I’ll be in your inbox again soon.

Best,

Mallika