Article

The art of being vaguely right

2022 in review paul jackson

Welcome to Uncommon Truths, Paul Jackson and Andras Vig’s regular in-depth look at the big topics impacting markets. 

In each edition, Paul looks at the latest market trends or events – like rising interest rates – analysing what it means for various asset classes – like fixed income and equities. He also assesses how our model portfolios are impacted.

 

In this edition:

  • Whether it’s the search for every last piece of information or rapidly turning over portfolios, we make the mistake of believing that being busy is the same as being successful (interestingly, frenzied stock market turnover often precedes bear markets).
  • Gathering as much information as possible, building “better” models and meetings lots of companies/analysts boosts our confidence but not performance.
  • Likewise, short-term gains give us a buzz and shortening time horizons lead to the dominance of the emotional ‘self’ over the rational ‘self’. Unfortunately, operating with short investment horizons is very difficult (the range of market outcomes shrinks as the time horizon grows).
  • Paul Jackson’s suggestion is: accept how difficult it is to outperform (set expectations accordingly); invest for the long term; rely on a limited number of reliable indicators ( he focuses on long term valuation metrics such as CAPEs) and communicate less frequently about performance (otherwise it‘s just noise trying to explain noise).

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Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.