Broker Check

Discipline vs. Adaptation

October 11, 2021

Michael Batnick (@michaelbatnick on Twitter), a financial advisor based in New York, posted an article that hit home for me yesterday.  

Michael's post (linked below) explains today's version of yesteryear's Get Rich Quick Schemes seem to be...working?  Everything investors have been warned against as a Siren Song, alluring and dangerous at the same time, has so far provided all of the former and none of the latter.  Warren Buffet said in a 2018 interview "People start being interested in something because it's going up, not because they understand it or anything else. But the guy next door, who they know is dumber than they are, is getting rich and they aren't."  

The most difficult part of investing, however, is understanding not everything is a bubble.  Yes, the emergence of internet stock euphoria led to the tech bubble and crash of the early 2000s, but QQQ has outperformed SPY since March 1999 by over 2% per year.  That performance includes the crash. The internet bubble was popped, but the tech that led to the early enthusiasm turned out to be the cornerstone of the next leap forward in the American economy.  

This dynamic, the balance between discipline and adaptation, is a continuous challenge for investors.  Too strict a conformity to the ways of the past and you'll miss the trends driving the market forward.   A lack of discipline leading to a chase of every investment fad has led many to ruin.  It's this balance, a commitment to systematic, managed risk taking, that leads to successful, long term investment results.  

It feels like everything we’ve been told not to do is paying off right now

— Michael Batnick (@michaelbatnick) October 10, 2021