“You should have been here yesterday!”
It happens on every fishing trip. At dinner, a well-intentioned fishing buddy or acquaintance tells you about the unbelievable fishing he experienced earlier that same day just over the mountain. “You should have been there!” he boasts.
Images of rising fish in numbers and sizes of mythical proportions race through your mind. You force a smile, hopefully hiding your jealousy as you contemplate poking your dining pal with a dinner knife.
After a restless night’s sleep, you get up early to beat the competition (real and imagined) to the “hot” spot that your dining pal bragged about the night before. Almost invariably, the fishing is not as good as you had imagined it would be. It’s not that your friend misled you. Instead, the fishing conditions simply changed overnight, most of the time for reasons that aren’t readily apparent or understandable. That’s just the nature of fishing and so many other pursuits in life.
I see the same (“Shoulda’ been here yesterday”) phenomenon happens in my other passion–investing. A well-intentioned friend tells you about an investment opportunity that recently produced great results. You decide to take your friend’s advice, but after moving your money into that same investment or opportunity, you suffer a disappointing outcome. Why? Because the market conditions had changed by the time you arrived. Regardless of the reason, the returns you hoped for didn’t materialize and you begin the “chasing” cycle all over again.
Be patient, don’t chase
Chasing is a behavior that usually results in bad news for both fishermen and investors. The bad news for fishermen is that they may have less to brag about at dinner. The bad news for investors is more serious–they may not be able to afford dinner!
However, investors don’t have to feel like they’re always a day late seizing opportunities. Why? Because by using a diversified portfolio strategy, they can fish all the streams of the capital markets at the same time. In doing so they have a much greater chance of harvesting a more consistent catch. At any given time, one stream may have a great harvest while another does not. A short while later conditions could reverse. But, on average, the diversified investor will always have something to brag about.
Be sure to preserve your bragging rights with a well-diversified portfolio. Learn more by watching this series of videos about evidence-based investing.
- How many times have you “just missed out” on a hot fishing spot or investment opportunity?
- Whether on the river or in the markets, conditions can change at a moment’s notice without warning or reason.
- A well-diversified portfolio enables you to fish all the streams of the capital markets simultaneously—and maximizes your chances of harvesting a more consistent catch.