Stock markets worldwide continued to rise in May despite the unstable economic situation. Since I started investing, I have never seen a more glaring example of how investors first prepare for the absolute worst-case scenario and then, just a few weeks later, act as if anything but happy days was unthinkable.
The last three months (and maybe the next three) will be studied at business schools for many years to come. As heartbreaking as it was for some of us, it was also very instructive. There are so many valuable lessons to be learned from it. It is a unique opportunity to sit back and watch the collective behavior of the market, the largest intellectual organism on earth, during the most severe and sudden economic crisis. There have been similar or worse situations for our society, but never before in the current information age. It was truly remarkable, and the ride is still not over.
Equities grew this month with the S&P 500 up +4.53% and the Nasdaq at +6.75%. Our strategies performed below that benchmark with Universal +2.91%, MiniMax -0.90% and Pro 3.01%
In recent months, I have repeatedly spoken about the importance of a repeatable investment strategy. Of course, there are many different approaches, but all successful long-term investors ultimately have their own clear strategy.
The more robust this strategy is, the greater the potential for success. This is particularly true if you commit to stick to it through thick and thin.
In my view, consistency makes up 80% of the success in investing. The remaining 20% is having a process you can rely on when things get scary and you suddenly feel you know better.
It is this 20% that ultimately makes the difference. I can tell you from my own experience, how every instinct in my body said that the current market suffered a crazy hit and that prices cannot go up again anytime soon. But my calculated strategy said otherwise and I followed it.
This does not mean that the strategy is always right, but it means that we have a 20% better chance to overcome emotions and act objectively when things get tricky. Investing is like flying a plane: 80% of the time it’s a piece of cake. But in the remaining 20%, it’s important to have a clear plan in advance on how to react so that you don’t become a plaything of your emotions.
Stay happy, healthy and wealthy!
Omar