Some Thoughts on Investing (and Life)

• A business can be under or overvalued for many years. The longer the time horizon, the more likely the share price will converge towards intrinsic value. 
• Judging your investing ability on how share prices move in the short term is a bit like appraising a poker player on one round of cards. It’s at best futile, and at worst dangerous. There’s too much randomness and luck.
• Investing successfully often requires embracing pain. It was painful buying stocks back in March last year, and even more so during the 2008/09 financial crisis; but those who managed it reaped great rewards. Investing is hard because it goes against every human instinct. Normally pain is a warning signal, but in investing it’s often a buying signal. 
• The most painful asset to own right now is probably cash, since it’s losing money in real terms, while virtually every other asset keeps rising. At times like these it’s easy to forget that cash:

1. Acts as a security blanket and immediate source of liquidity – this is crucial, especially in difficult times, when other assets are falling in value
2. Provides ammunition to exploit future opportunities 

Investors are most likely to give up on cash, in favour of riskier assets, at times of optimism. 

• I used to ‘know’ things. Nowadays there’s very little I’m sure about. Time and experience have made me more humble, in life and investing. One of the few things I’m certain of is that I don’t know very much. I try to keep this in mind when making investing decisions, e.g. by demanding a margin of safety, especially in terms of balance sheet strength and business quality. 
• I’m not sure how good I am at investing. No one can be unless they have exceptional ability or an extremely long track record. It’s an uncomfortable admission, given I’ve dedicated a large part of my life to investing. However, I’m comforted by three things:

1. I enjoy the process and have learned a lot
2. I’m pretty sure I’m a better investor now than 3 years ago and very sure I’m better than 10 years ago, so I’m moving in the right direction
3. My investing results have been satisfactory so far, regardless of my abilities 

• Fear stops us from doing many things. I was quite fearful about starting this blog. I didn’t know how to set up a website, or whether people would care about what I had to say. I’ve had some help from a friend which I’m grateful for. Without this second pair of eyes I might not have done it. I’m glad I overcame my initial fears, if only for some of the people I’ve met through Twitter (especially John Garrett from Mastersinvest whose website is far better than this one, and Chris Mayer for his exceptional blog and wisdom).
• I think I took myself too seriously in the past. Not much is really worth stressing about, least of all daily share price movements. The main thing that matters to me now is personal relationships, especially with my partner who is an enormous source of support. In the past, I haven’t prioritised relationships as much as I should have. 
• I think most of us accumulate too many possessions through life. We would be better off cultivating relationships and experiences than acquiring more stuff we don’t need. 
• I think most of us vastly over-estimate how much money we need to live a full life. We also, wrongly in my view, equate status with net worth. Doing a job you dislike, or retiring later than you would like to, in order to die with a bigger bank balance seems really dumb to me. Getting this balance right is tricky, since we don’t know when we’ll die or what our future spending needs will be, and I don’t really have an answer. But we should probably seek to avoid constantly moving the goalposts, or accumulating more money for the sake of it. 
• Time is the most important and scarcest resource that exists. Having the freedom to choose how we spend it, and taking care to avoid wasting it, are two goals worth striving for. 
• Saying whatever we want, whenever we want, however we want is not freedom. Real freedom is choosing not to say these things. It took me a while to realise this because I value honesty. But there are ways to be honest and it should always be approached with kindness. 
• I look back at what humans have achieved over the last century and I’m in awe. We’ve progressed in so many ways; not least in medicine, technology and genetics (these vaccines are quite remarkable for one). I’m not naturally a glass half full person. But I’m hugely optimistic about the next 100 years and what we might accomplish. 

By the Undercover Fund Manager, published by our friends at: