Morgans musing

How to be a genius when everyone is going crazy

As explained by Morgan Housel

Dwight Eisenhower liked to say that Napoleon’s definition of a military genius was “the man who can do the average thing when all those around him are going crazy.”

It’s the same in investing — especially as markets get wild, as they’ve been in recent weeks.

Doing well over time doesn’t require exceptional insight or complex strategies. What it requires is maintaining a level head during brief periods of upheaval.

The biggest secret in investing…

… is that average returns sustained for an above-average period of time lead to extraordinary returns.

Billionaire investor Howard Marks once talked about an investor whose annual results were never ranked in the top quartile, but over a 14-year period, he was in the top 4% of all investors.

If he keeps those mediocre returns up for another 10 years, he may be in the top 1% of his peers — one of the greatest of his generation despite being unmentionable in any given year.

So much of the focus on investing…

… is on what people can do right now, this year, maybe next year.

“What are the best returns I can earn?” seems like such an intuitive question to ask.

But if you understand the math behind compounding, you realize the most important question is not “How can I earn the highest returns?” It’s this: “What are the best returns I can sustain for the longest period of time?” Just staying in the game, consistently, through the chaos.

If you:

  • Kept your head on straight when the market crashed in 2000, you’re an investing genius
  • Remained calm during the crash of 2008, you’re an investing genius
  • Haven’t panicked over the last few months of volatility, the same thing

It doesn’t take much, but it makes all the difference in the world.

See also  What Is Your Price For Compromise? 

Similar Posts