I’m back and running running full speed after a great trip with my family. I’m always amazed at how recharged I can feel after a break from work. We were up North at a lake and although the weather wasn’t great, we made a ton of memories. The below above is of my daughter checking out the sand for the first time.
As I was catching up on some reading last week, I saw this tweet:
Its possible to know a company & its management so well that you’ve “due-diligenced” yourself right out of objectivity about your subject.
— Ed Borgato (@EdBorgato) June 12, 2014
This really struck a chord with me because I know it to be true. Getting away for a little bit gives me a chance to slow my mind down and get a new perspective on many things. One thing I do with my investments is to look at them on a regular basis and ask myself, would I invest in this again today?
As investors, it’s critical not to get sucked into complacency caused by comfort. Even if I’ve owned a positions for years, I still ask myself, how could I invest that capital today? All things considered, is there a better place to get investment returns than where it’s currently invested? This is even more critical when you’re a fairly concentrated investor like myself.
What I’m not saying here is don’t do your due diligence on a potential investment. I’m saying objectivity is key. Just because you know the company’s managers very well or because you’ve spent a tremendous amount of time analyzing a company, doesn’t make it automatically a good investment. All it means is that you’re comfortable with the company.
For example, I’ve looked at investor portfolios before that had long-held positions in them. The investment may have doubled during that time and the investor was feeling very good about the investment. However, when we looked at the amount of time that had past since the stock had done anything, the investor realized that their actual annualized return was quite a bit lower than what they thought it was. And the reason they held on to the stock? Because of the past gains and their belief that it was safe. In other words, the investor was comfortable.
It’s critical to investing success to continually analyze your positions and as you’re doing so, ask yourself, “am I being objective?” We always have to ask ourselves, given the opportunity, would I invest again today considering everything else that is available?