Mark Twain is famous for saying, “History doesn’t repeat itself, but it does rhyme”. The best and truest wisdom has no sell-by date. Timeless wisdom holds true regardless of the time or circumstance. Charles Ellis is one of Wall Street’s most noted observers. The following piece is from a speech he gave in Toronto in 1988. The world has been turned upside down this year it seems. So it is especially important to keep these words in mind. They are as true today as they were back then.
Three Ways To Succeed As An Investor:
There are three ways in which you might try to achieve superior results: one is physically difficult; one is intellectually difficult; and one is emotionally difficult.
Warren Buffett, John Templeton, Dean LeBaron and Warren Goldring and a very few others have staked out the intellectually difficult way of beating the market.
Intellectually difficult investing is pursued by those who have a deep and profound understanding of the true nature of investing, see the future more clearly and take long-term positions that turn out to be remarkably successful. We admire them, but usually only in retrospect. At the time of their doing their best work, we see them as misguided. We do not want to do what they are doing because it looks so unpromising.
Most of the crowd is deeply involved in the physically difficult way of beating the market. See if you don’t recognize the physically difficult right away. They come to the office earlier; they stay later. They read a larger number of reports more rapidly. They go to more breakfast meetings and more luncheon meetings and more dinner meetings. They are on the telephone, making calls and receiving more calls than all the rest. They carry huge briefcases home at night, determined to get ahead by reading more reports before the morrow. In every way they possibly can, they put enormous physical energy into trying to beat the market by outworking the competition. What they don’t seem to recognize is that so is almost everyone else.
Being incapable of doing the intellectually difficult, and reluctant about the physically difficult, I have set about the emotionally difficult approach to investing. This straight forward, untiring approach is simply to work out the long-term investment policy that’s truly right for you and your particular circumstances and is realistic given the history of the capital markets, commit to it and – here is the emotional difficult part – hold on.
When your friends turn to you and say, “Wow! Have I got an opportunity for you! This is a great time to buy!” be absolutely uninterested. And when they turn to you and say, ‘’Oh, Lord, this is it. It’s going to be one hell of a crash. Get out now while you can!” you must simply be not interested, absolutely sound asleep. No intellectual effort; no physical effort; but for most, emotionally far too difficult. It suits me just fine. It requires no great genius and no great brawn, but it works.
– Charles Ellis