Investing Is Like Judging Hogs at The County Fair


My youngest son is a member of a 4-H livestock judging club. Since he is too young to drive, I take him to the meetings and usually hang out to watch the proceedings. In a judging competition, the competitors are shown a group of four animals. They rank the animals 1 – 4 and then explain the reasons for their ranking to a judge. There is a lot of freedom allowed for the competitors to combine their imagination with technical jargon to come up with flowery descriptions (i.e. “flatter in his stifle” or “less condition over his loin edge” or “exceptionally long from the hooks to the pins”). Combining observation with verbal agility to argue your case is a nice skill to develop, but the reasoning isn’t enough by itself. Continue reading

Defense Wins Championships

Public domain image courtesy of John Van Winkle via Wikimedia Commons

Public domain image courtesy of John Van Winkle via Wikimedia Commons

Investors often take the words “defensive” or “conservative” as code for “being willing to accept small returns.” The truth is, playing defense can be the easiest way to boost your returns.

Most investors focus on offense. Finding the next Tesla or Google. Trying to figure out which sector will benefit most from next week’s GDP numbers. Who’s going to beat estimates and by how much, etc.

The problem with focusing solely on offense is that it’s almost impossible to possess an advantage. You use the same information to try to find the same opportunities as everyone else. For example, Continue reading

Space Between the Notes

I always listen to what I can leave out.
-Miles Davis

 A lot of art, a lot of life, is made better by subtraction. The sparing use of musical notes or brush strokes or words in a sentence lends greater emphasis to those that remain. The space between the notes is like a showcase, almost a stage of its own.

A garden will have better results with fifteen carrots in a square foot than it will with fifty. Fifty looks more impressive when they first sprout, but they quickly crowd each other out. The patient use of space pays off when it counts.

Most people will get faster results by lifting weights two or three days per week instead of every day. It’s not the lifting of weights that makes you stronger – it’s recovering from lifting weights that makes you stronger. Without space to rest and repair, the workouts will weaken you over time.

In the course of managing an investment portfolio, it is easy to fall into the trap of wanting to always make things happen. Chase from one market to another. From one strategy to another. To keep adding new screens, more complex rules and metrics. These efforts seldom yield good results. The more effective course for most would be to do the opposite. Subtract. Continue reading