These innocuous words helped to make me a much better investor.
When I was a Very Young Analyst at a Very Big Firm, a Brand New Fund Manager, Will Danoff, was one of the first people who listened to my ideas. He bought the very first stock I recommended, and even then, when the asset management business was much smaller and my own role was minuscule, the idea that people trusted in the judgment of me and my colleagues was a source of great honor, pride, and responsibility.
Trouble was, just a couple weeks later, the stock was up a lot, but the company’s business was a little shaky. Green as I was, I’d already learned that an investor is supposed to have high conviction, to be able to think long term and to withstand little wobbles in the stock market or in business conditions, so I took an extra-deep breath as I went in to give Will the update. Things had changed, I said, and I wasn’t so sure we should continue to buy the stock.
He asked a few questions, shrugged, and said, “Okay, maybe I’ll sell a little.” That’s it! No yelling, no panicked “sell all shares” order to the trading room. Just a little tweak. He must have seen how relieved I was because then he added, “You know the greatest thing about investing in stocks? When things change, you’re allowed to change your mind.”
Sure enough, a little while later, the stock price fell and business was actually improving, so we had a chance to add back to this small position, which eventually became a long term holding.
One of the toughest balances for an investor is this one: to simultaneously demonstrate high conviction and open-mindedness. If I hadn’t learned this lesson so early on, I would have suffered, and so would our shareholders. Sure, we need to think and plan and act for the long term. And sometimes, you need to adjust course a bit along the way.
Whatever you invest in – stocks, your own work, your family’s well-being – something has changed lately. Have you taken it in with equanimity, adjusting course while keeping that long term vision? As with most balancing acts, it’s easier said than done.
From September 1990 through September 2006, Will’s fund – Contrafund – averaged returns of 12.7% annually, 2.9% above the market. As Fidelity highlights Will’s long-term success, I add my admiration, and my thanks.