These words of Sir Walter Scott, written in 1808, could have been written today as we explore the boundaries of technology and of entrepreneurial endeavour.
Words matter, or so we are told. The murder of Charlie Kirk, a campaigner for debate and free speech, makes the case. We read in the Bible that out of the heart the mouth speaks and out of the heart flow all the issues of life. You may think this is bunkum, but you would also probably concede that the way we manage social discourse is subjective. Our opinions and how we express them shape our social relationships, both personal and professional. Freedom to write or speak as we wish is, by definition, subjective and not absolute, allowing for offence to be given and taken. From the way we deal with this flow the issues of life.
In the age of smart phones, social media, and constant ‘investor entertainment’ masquerading as news, the investor is vulnerable to opinion motivated by the sales process. The financial media is strewn with headlines bearing little or no relation to the reality of the subject. We are constantly assailed with words and phrases like crashes, plunges, soars, unsustainable, dumped, no way back, wiped out, and doom loop. Click bait is subtle and can ‘catch’ us all, and it seems that good news does not sell!
The market is made up of people who make mostly emotion-driven decisions about how to allocate capital. As investors, we all make up the market. With today’s technology, instant access to headlines makes us all vulnerable to decisions driven by anxiety. Impulse is the enemy of the investor. Would you be able to resist turning an unrealised loss of 25% into a permanent loss, when the media and guru podcasters are all screaming ‘Sell, sell, sell!’? Once you run away it is very difficult to get back in. Believe me. After over 30 years of investing, I know.
Most investment managers and private investors fail to achieve their desired investment outcomes because they are emotionally unable to stay the course or are overtaken by liquidity events. The average investor only holds an investment fund for 4 to 5 years. Owning real estate helps an investor to avoid making impulsive decisions, but a portfolio of real estate is illiquid. You cannot sell a bathroom or the master suite if you need to raise cash. In addition to real estate, the wealthy should own a portfolio of marketable securities that can provide capital within three days if needed. Resisting the urge to ‘click’ on a sensational headline will not only save valuable time but can also help you avoid what could be a costly error.
When held accountable for misleading headlines, financial journalists plead editorial privilege: ‘It is the sub-editor; nothing to do with me.’ To quote Nate Silver, a leading statistician and pollster in the US, ‘Watch the signal, not the noise.’ To the extent we can tune out the noise and resist click bait, we will stay the course and put the odds of achieving our desired investment outcomes in our favour.
Jeremy Blatch TEP