{"id":3717,"date":"2014-03-03T07:31:40","date_gmt":"2014-03-03T05:31:40","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=3717"},"modified":"2014-03-03T07:31:40","modified_gmt":"2014-03-03T05:31:40","slug":"no-es-un-trimestre-ni-un-ano-es-toda-una-vida-inversora","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/no-es-un-trimestre-ni-un-ano-es-toda-una-vida-inversora\/","title":{"rendered":"It is not a quarter or a year. It is an entire Investment Life."},"content":{"rendered":"

\"\"Investment gurus such as Warren Buffett have it ingrained in their very DNA: Investing is like playing any sport whilst focusing on the game itself, whereas doing so whilst focusing on the score is pure speculation<\/strong><\/em>. The matches, the championships and the well-deserved glory go to those who focus on the pitch \u2013 on constantly improving their strategy and competitive skills when selecting companies in which to invest \u2013 rather than on the absurd speculation of managing a digit displayed on a neon sign, which, incidentally, is as volatile as our own incompetence.<\/p>\n

Buffet \u2013 like the rest of the world\u2019s top multimillionaire investment gurus \u2013 never tires of repeating this over and over again, in every possible way, as in his latest annual letter<\/a>, where he also discusses the few property investments he has made throughout his life. Well, few, that is, if we do not take into account that every investor, when buying shares in a company, is at the same time acquiring a proportionate share of the property assets that the company owns, of course.<\/p>\n

One of my favourite quotes from Buffett\u2019s latest annual letter is this one: \u00abIf you enjoy your weekends without worrying about market prices, try doing the same during the week.\u00bb<\/strong>\u00a0How simple, and yet how effective! Every business owner knows full well that the evolution of mature businesses (barring technological exceptions where products become obsolete and competition is fierce) involves positive or negative momentum that cannot be predicted in the short term. Businesses tend to show little variation from quarter to quarter unless they are in their start-up phase. This is because, in mature companies, the suppliers remain the same from one quarter to the next, and forecasts for sales, costs and profits will vary little. To identify substantial changes in the performance of such businesses, we must look not at quarters but at years. Only then can we observe a significant shift in business performance that warrants a different valuation, whether upwards or downwards. That is why it is absurd to invest in the stock market \u2013 in mature, stable companies, which make up the majority of listed firms \u2013 by making decisions to buy or sell shares over periods of less than a year, based solely on their current market price<\/strong>.<\/p>\n

Unfortunately, most so-called \u00abinvestors\u00bb \u2013 who are in reality nothing more than speculators \u2013 enter and exit the market, frantically buying and selling shares, whilst the underlying businesses remain unchanged during those short periods. These misnamed investors \u2013 who, we repeat, are the majority \u2013 play their game by focusing on the scoreboard, rather than on the action on the pitch. Because focusing on the action on the pitch means focusing on the performance of the business in which we are investing when we buy those shares. And to ensure we have the best players in our line-up, we must focus solely on the quality of the businesses in which we invest, and have done so at prices that are low relative to their intrinsic value.<\/p>\n

If we do this systematically, not only will we win most matches, competitions and titles, but we will also have enjoyed our profession, sport or investment, without suffering the anxieties and disappointments that any scoreboard can temporarily bring. Furthermore, if we do not focus on good play, skill and strategy, the score will only be in our favour for a few minutes, meaning that the suffering and anxiety caused by the rollercoaster of results will be the norm over the years.<\/p>\n

Here\u2019s a case in point. Just this week we had a meeting with a former senior banking executive, a seasoned professional with greying hair and vast experience in the world of investment (sic). He told us that he had now left that sector to devote himself to business consultancy. And he explained this to us with enthusiasm, because he said he was fed up with the markets. \u00abI\u2019ve finally given up trading on the stock market and am now focusing on the real economy<\/em>\u00ab, he said. The phrase is well worth noting, as it reflects two very revealing sentiments: Firstly, it says a \u00abat last<\/em>\u00bb which suggests that he has suffered whilst \u00abadvising\u00bb his clients. And secondly, and in line with the first point, for him the stock markets are not the real economy, the economy of businesses, but something abstract and ethereal that has nothing to do with the real economy\u2026 What a dangerous position this man has been in \u2013 like so many other bankers throughout their careers \u2013 if his view of the stock markets, that is, the buying of shares, is something that has nothing to do with the performance of the businesses and economies in which he recommended his clients invest! And a sign of his failure as a speculator and\/or pseudo-adviser to speculators is the relief he feels at being able to devote himself \u00abat last to the real economy\u00bb, as a business consultant.<\/p>\n

This banker, like so many others, will take his remorse and his private acknowledgement of having been unable to advise his clients properly to his grave. Although he may ease his conscience by convincing himself that the markets are simply that cruel, and that no one could have done more to prevent the disasters that have led him to grow weary of his profession. In fact, he surely knows countless colleagues with even fewer ethical standards who have fared worse, and who continue to offer their advice without the slightest qualms, because they do not even feel bad about it.<\/p>\n

In any case, they all make the very serious mistake of taking to the pitch with their eyes fixed solely on the scoreboard, without paying any attention to their team\u2019s line-up, strategy or skills. They completely ignore all the other factors that any self-respecting investor must take into account \u2013 factors which, moreover, are so obvious to anyone with common sense. They rush onto the pitch, match after match, focused solely on the timing and the whims of Mr Market and the the schizophrenic world of banking<\/a>.<\/strong><\/p>\n

The fact is that an investor\u2019s journey extends far beyond a single quarter, a year or a three-year period. An investor\u2019s journey is the period during which we bear the responsibility for managing our assets, until we pass the baton on to our heirs. It usually lasts three or four decades, as most investors who build up a modest amount of wealth do not tend to do so until they are 35 or 40, and they usually stop managing it in old age. So do the maths and you\u2019ll see that the most common and reasonable duration of an investment life is usually a minimum of two and a maximum of five decades. That\u2019s no small matter. And the most crucial point is that only by avoiding serious mistakes throughout all those decades will we achieve a successful outcome and a comfortable, peaceful journey, with financial security and free from financial shocks or anxieties.<\/p>\n

That is why it is even more important, if anything, to avoid fatal mistakes than to achieve optimal management. A single serious mistake \u2013 such as falling for the pre-emptive shares scam, investing in or taking out a mortgage on property at the height of the bubble, launching a disastrous business venture and lacking the agility or ability to rectify it, or simply being advised for years by speculators for whom investing is nothing more than watching an electronic scoreboard, will condemn us to a life of investment failure. And do not think that a brilliant career can make up for such mistakes, because they tend to wipe out all the income earned through the daily sweat of one\u2019s brow, however hard-earned it may be. That is why most ordinary people face a later life dependent on a failing pension system and without any financial safety net to ward off financial insecurity.<\/p>\n

Given this outlook on investment long and momentous<\/strong>, naturally, the short-term results of an investment portfolio become less important. Whether we make a profit or a loss in the short term, what matters most is always being well positioned on the playing field, with the best squad, strategy and skills. We may temporarily trail others on the scoreboard; for a few minutes, they might seem the favourites for the title, even if they\u2019re only looking at the result, but time will put them in their place. Make no mistake, it\u2019s a universal law. The same law that has propelled the world\u2019s greatest investors to the top of the wealth rankings \u2013 investors who have never cared about the short-term performance of their investments, but rather their value over the course of their entire investment life.<\/p>","protected":false},"excerpt":{"rendered":"

Los maestros de la inversi\u00f3n como Warren Buffett lo tienen grabado a sangre y fuego en su ADN: Invertir es como jugar a cualquier deporte centr\u00e1ndonos en el desarrollo del juego, mientras que hacerlo centr\u00e1ndonos en el marcador es pura especulaci\u00f3n. Los partidos, los campeonatos y las glorias merecid\u00edsimas se las llevan quienes se concentran […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[51,42,40,47,52,37,48,55],"tags":[],"class_list":["post-3717","post","type-post","status-publish","format-standard","hentry","category-banca","category-estrategia","category-gestion-financiera","category-gestion-del-patrimonio-inmobiliario","category-asesoramiento-patrimonial-multi-family-office","category-reflexion","category-asesoramiento-patrimonial-multi-family-office-crear-mi-propio-family-offices","category-necesito-un-family-office"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/3717","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=3717"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/3717\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=3717"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=3717"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=3717"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}