Thinkpiece

01 Feb Thinkpiece

In this update: 

• • Perspective

Perspective

An extremely important principle is the different points of view you get when you change your level of magnification. You can look at something with a microscope and see it a certain way, you can look at something with your eyesight and see it a certain way, and you can look at something with a telescope and see it another way.

Which level of magnification is the correct one? Well obviously, they are all correct, they are different points of view.

You can for example look at a newspaper photograph under a magnifying glass, where with a naked eye you will see a human face, with a magnifying glass, you will see a profusion of dots rather meaninglessly scattered. But as you stand away from that connection of dots, which all seems too be separate and apart from each other, they suddenly arrange themselves into a pattern and you see that these individual dots add up to some kind of sense.

Maybe we, when we take a myopic view of, for example, investment markets, we may miss that this adds up to some kind of sense and pattern.

Stocks don’t go up on time. Stocks go up over a period of time.

The real key to making money in stocks is not to get scared out of them.

Peter Lynch

The challenge with investing is that it works over time and not on time. Looking at this another way, investing works over a period of time, but not perhaps with our timing. Aye there’s the rub.

Our perspective may be so narrow that we may forget that we need to give markets time. We may also lose sight of our original objectives and financial plan.

There are no get-rich-quick schemes when investing. One has to take the rough with the smooth. However, thankfully, the smooth is much more prevalent in markets than the rough. We tend to overemphasize the rough and exaggerate its presence, whereas the smooth is often downplayed, but significant.

A danger then for us is that we may attempt in difficult times, colloquially known as bear markets, feel that we need to take action, that somehow our investment strategy was wrong all along, that, somehow we have miscalculated, that somehow what is happening right now is permanent.

If you have invested into an appropriately diversified portfolio investing into well-researched, good quality businesses and you have a healthy margin of safety in cash, then the moral is to stick to the plan. Don’t be dissuaded by a limited perspective! 

Stocks go down faster than they go up but go up more than they go down.

David Gardner

The only permanent thing is change.

Summary

• Retain your perspective from the narrow to the wide.
• Keep your margin of safety in mind during rising markets and ensure it is ready for the next bear market.
• Remember there are no get rich quick schemes.
• Focus on what you can control.
• Volatility is not loss.
• Stick to your plan.

During the Gold Rush, most would-be miners lost money, but people who sold them picks, shovels, tents and blue-jeans (Levi Strauss) made a nice profit.

Peter Lynch

If you’ve not yet put in place a sound financial plan and you’d like to know more, please feel free to contact us on
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The views expressed are not to be taken as financial advice. Professional advice should be sought before proceeding.