Courtesy of Morgan Housel;
It is remarkable how much long term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.
Housel’s post wasn’t really about the quote but still a good read.
Behavioral flaws is a common talking point here because of how important it is in terms of long term investment success where success is defined as having enough when you need it. Everyone has their own behavioral issues, there’s no avoiding that but people can take the time to try to assess what their flaws might be, recognize them and then have a better chance of not being done in by them.
A big flaw that many people have is impatience. The last couple of years have been great for index investors. Indexing is of course a valid strategy but indexers had to face impatience during much of the previous decade. There will be times again where indexers will have to confront impatience and remain disciplined even when it is very uncomfortable to do so.
You could tweak the above paragraph to be about any valid investment strategy.
The point obviously is that investing is about patience. Everyone realizes this during times of minimal emotion but being patient becomes more difficult when emotions ramp up for whatever reason.
This is where Munger’s quote becomes most important. It is not that difficult to know that you have a valid strategy and if you can realize during the good times that times will not always be good then focusing on the need for patience becomes the equivalent of trying to not be stupid. Stupid would be constantly switching to whatever is best right now. This is known as chasing heat and it is a bad idea.
Keep it simple.
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