As we enter a world of rising interest rates, recessions and bear markets, what are the traits investors need to navigate their new paradigm? Or, to put it differently, how do you make sure you don’t make critical errors with your investment portfolio at this time?
Some will be successful. Many will fail. So, thinking more deeply, what traits enable you to feel confident enough to stick to a long time horizon? There are few that I’ve found that work.. In other words, learn the right lessons from your successful and unsuccessful investments, and don’t change what works. For 90% of people an honest reflection will demonstrate that your time horizon was the main contributor to making a profitable trade.
Another example is the one of a 20-year-old college student who raked in a $110m profit on a stock called Bed Bath & Beyond after investing $25m in the meme stock. The reality was it was a short term, high-risk trading strategy executed on a fatally flawed company. There are also just plain mistakes. Investors who followed a strategy of replicating the trades of Warren Buffett, Peter Lynch or Jim Chanos have done well, and have been wise in so doing. But they would have been poorly served by following the trades of Mayoshi Son, Bill Miller or Bob van Dijk. Following a billionaire’s trades only work when you follow the right billionaire.