We’ve asked this question to nearly 100 different guests on our pocast, Investment Uncut (subscribe here apple | spotify ) including investing legends like Rob Arnott of Resarch Affiliates, Charles Plowden of Baillie Gifford, fund researcher Deb Clarke, Professors like Allison Schrager, Ludovic Phallipou and Alex Edmans and authors Robin Wigglesworth, David Ricketts and Joe Wiggins.
What are some of the top answers to this intriguing question?
I’ll add quickly that I don’t agree with all of these – some I personally think ARE properly appreciated, but that’s the beauty of asking a load of different people a question!
What is the most underappreciated thing in investing?
- How difficult & complex it is (even the best investors only get a very slight majority of calls right). but also …
2. How easy it is – anyone can be an investor today with £100 in an index fund. I quite like the weird dichotony between this two perspectives which of course are both correct in their own way.
3. How much impact you can have as an investor. Investors aren’t simply bystanders or passengers, decisions taken in the financial sector influence capital alloction in the real world. As an investor, the things you ask you managers for – in agreements, guidelines, reports, these all influence behaviour an capital allocation.
4. The market doesn’t reward comfortable decisions. If a decision is comfortable it probably won’t lead to outperformance.
5. The role of luck in investment outcomes. Best not to put “successful” investors on too much of a pedestal. There success could well be mainly down to luck, and if not luck then it could be exploiting an anomaly which isn’t repeatable.
6. That the investment industry has let itself down over recent decades, but can and should be a force for good.
7. That it’s actually all about the people (not numbers, spreadsheets and performance).
8. Holding nerve on underperformance …. people lose faith quickly, read across from underperformance to other smaller monitoring points, and jump to a conclusion at the wrong time which locks in a loss. A sell decision is often justified on other points but often really driven by underperformance.
9. Doing nothing is incredibly powerful, not lazy or negligent. Far too much value is placed on activity and the industry perpetuates that.
10. There are only perfect answers with the benefit of hindsight. Getting things spot on is more often due to good luck than judgement. If you get the framework right you maximise the chance of getting something right, but you can never be sure today (only in hindsight). So go easy on yourself – but do what you can to at least make the best decision you can.