“Being Bullish Brings a Competitive Advantage”

The blogger at Dividend Growth Investor linked to this interview with Nick Train. In it, Train shares a lot of investing wisdom. Here’s a sample.

John Templeton once said, “History shows that time, not timing, is the key to investment success. Therefore, the best time to buy stocks is when you have money” – a philosophy you share. What would you do in a 1999 or2007- like scenario? Continue to invest? Yet another view says, “Wait till there is ‘blood in the streets’.” How do you reconcile these two?

I have never suffered from any delusion that I am an unusually smart or far-sighted investor. A keen sense of my many investing Imitations means I have had to keep my approach simple. I am mostly concerned with avoiding obviously bad or ‘losing’ investment behavior such as over-trading or backing low-quality companies and I’m willing to stick with basic investment principles that seem to me likely to work over time, even accepting there will be periods when they don’t.

Your first question is a good example. For a while, as an inexperienced investment professional, I tried to judge whether equity markets were cheap or expensive. I even allowed myself to express pessimistic views about market prospects in public and, worse, to act on them.

Now looking back over the thirty or more years of my career, it seems to me every one of those negative calls I made on markets was just plain wrong. They’ve gone up a lot over time and in hindsight there was always something to be enthused about. And likely there always will be.

Eventually I acknowledged, for me, the futility of such guesswork about market levels and concluded that it makes good commercial, investment and – perhaps most importantly – emotional sense to be permanently bullish.

This, I believe, is good, ‘winning’ investment behavior. Being bullish brings a competitive advantage over the many market participants who are either negative because that is their habitual outlook on life (an outlook that tends to overstate temporary problems and to underestimate human problem-solving ingenuity) or who back themselves to trade in and out of equity markets on the basis of their hunches about market levels; or both.

Of all the losing investment approaches out there, that of being a pessimistic trader must be the most certain to lead disappointing returns. So I practice the exact opposite – I’m an optimistic buy-and-holder. In this way I put history on my side, given the long-term propensity of stock markets to rise over time, Anglo-Saxon ones at least. In addition, I feel a lot better about myself — optimism keeps you young!

You can see the whole thing here.

Posted by on August 30th, 2021 at 9:53 am


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