“Where you stand depends on where you sit.”
Photo Credit: Hans Neleman
This observation can be applied to management, politics, or investments. I got into this business from the bond-side; I was a bond analyst and Treasury Note trader for a mid-sized bank before I became a portfolio manager. Bonds are math-y things: the maturity date, call date, coupon rate, yield to maturity, and settlement details all affect the price in different ways.
So I tend to look at investments quantitatively. This is true in my personal life as well: my kids like math. When I evaluate a portfolio, I look at its mathematical features first—return, volatility, number of holdings, diversification, and so on. And these statistical measures do capture much of what makes a portfolio work.
But not everything that counts can be counted. There are qualitative issues that resist quantification, such as the character of management, its strategic direction or quality of leadership, or a business’s “moats.” So I need to have pursuits that aren’t so numerical, like literature or art. If all you see are numbers, you’re only getting part of the story.
To be effective managers, we need to understand our biases and how they might mislead us. Because taking the right road often means avoiding the wrong turns.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!