Investing often follows a routine. We identify ways of turning investing into a set pattern or a routine. Our choosing to invest in what has recently performed well is a good example of this approach. A routine helps every investor to organise his savings, deploy money steadily and to achieve his investment goals. The key thing is to follow investment discipline for very long periods of time. Then, why do routines fail? There are numerous instances of failed investment routines.
The reasons for the failure of routine lies in many factors. Firstly, the choices we make are often not suited to our goals. We need to pick investments which work like a tortoise and keep moving steadily towards our goals. Secondly, we must avoid investment choices that show great near term promise but can potentially slow down significantly over time. Investing on the Hare over the Tortoise happens so often in our lives. Yet, we don’t consciously move away from making that mistake. That is where we need to take our investing beyond the routine. We should be careful to restrict the routine just to what will run steadily.
Thinking beyond the immediate is a good way of focusing our choices. One must decide which investment will outlive other choices, deliver consistent returns and show sustainable performance. Only such choices can be routinely invested into and owned for very long periods of time. For the rest, there will come a time when the routine must be broken and the investment exited. One should know how to pick that moment and swiftly break free. That is how we can make routines work well over the long term.
Avoiding where others go wrong is an important step in achieving investment success.- Seth Klarman.