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Slow and Steady Wins the Race in Investment Management
Slow and steady wins the race in investment portfolio management. Building wealth is a marathon, not a sprint. In the famous fable “The Tortoise and the Hare” the hare was mocking the tortoise for being slow and challenged him to a race. The hare was so confident he could beat the tortoise that he took a nap during the race. He awoke later to find out he lost the race.
The sprint causes us to be over confident, make mistakes, not plan, and not take into account probabilities and unforeseen events. We live in a society where we want everything now. We want to finish fast instead of developing patience and carefully allocating our resources based on probabilities.
Ecclesiastes 9:11 says “The race isn’t won by fast runners, or the battle by heroes. Wise people don’t necessarily have food. Intelligent people don’t necessarily have riches, and skilled people don’t necessarily receive special treatment. But time and unpredictable events overtake all of them.”
Building wealth is a marathon; not a sprint. In a marathon sometimes you have to conserve your energy so you have the strength and endurance to complete the race successfully.
In long term investing capital is your energy. If you expend or lose your capital you will not complete the marathon successfully. Every value investor should have a risk management plan that includes these concepts:
Margin of Safety
I want to investment my money when the odds are heavily in my favor. That means waiting for prices that provide a Margin of Safety for my money.
How much of your portfolio can you afford to lose? Slow and steady wins the race is as much about controlling losses as it is making money. Your maximum drawdown should be a definitive rule that keeps you disciplined in your investment management.
If you lose a large portion of your investment capital it becomes problematic to get your portfolio back on track. I frequently point out if you lose 10% of your portfolio it takes an 11% gain to get back to breakeven; but if you lose 50% of your portfolio it takes a 100% gain to get back to breakeven.
Slow and Steady Wins the Race
There are people who get rich quickly. Some win the lottery. Some pick the right stock at the right time and are able profit from luck. But these examples are a minute fraction of those who plan their success through sound principles.
Slow and steady wins the race in investment management. Have the patience and discipline to research, plan, and implement sound investment policies that will have a high probability of success.
Investing Principles Fundamental to Successful Outcomes
Minimize Large Portfolio Drawdowns
Invest With Confidence in Less Time - Manage Your Portfolio Without Behavioral Errors