Everyone’s looking for an edge. How can you be sure that you have one?
There are three roads to outperformance: working harder, working smarter, and working calmer. Working harder is a simple notion: do more research about stocks, bonds, and commodities than others, and apply this knowledge to your portfolio. It’s simple, but it’s not easy. It requires more reading, more phone calls, more meetings, and more effort. It can be physically challenging.
Working smarter requires a deeper understanding of the way the world works. Competing this way requires you to reflect deeply on how and why people behave the way they do. These investors are sometimes called financial philosophers, and philosophical concepts tend to dominate their thinking. They can often see a social trend before it emerges. It’s intellectually hard.
Working calmer requires you to keep your head when everyone around you is losing theirs. It sometimes means that you have to get away from the financial centers like New York or Chicago—or sometimes just not answer the phone. It means that you often have to do the opposite of everyone else, selling when markets are exuberant and buying when they seem depressed. It’s emotionally difficult.
Hard work, smart insight, and a wise temperament aren’t easy. But they’re the only way I know to maintain a competitive edge.
Douglas R. Tengdin, CFA
Chief Investment Officer
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