Video: Substance Over Stories
by Richard Taylor on May 21, 2020
Can you pick the winning stocks in this market?
This week our CEO discusses how investments can often have a compelling story behind them, but should they be believed? Richard draws on his own experiences and discusses what he's seen happen over the years with funds selling out-performance.
We believe that we are about to enter a period where the peddling of compelling stories will increase dramatically and they will get more air time. Because we want to believe that very clever and well-educated people can stock pick, or sector pick, or region pick, or country pick our way out of this crisis. We don't believe that many can or will and in trying to identify them your risk of overpaying and under-performing is much greater.
This is not a blanket dig at active management - we employ it - but rather a plea for long term investors to focus on the evidence rather than compelling but unproven stories.
00:00: Early in my investment career, it became really obvious to me how easy it is to sell a story when it comes to investments. It is really easy to put together a compelling, logical, even genuine story about why this company or this sector or this industry or this country is about to outperform all the rest. The problem is it's usually nonsense, or the evidence suggests it's nonsense and indeed my own anecdotal experience tells me, I've just seen too many of these sure things underwhelmed, under-perform, or even blow up. Now, the reason I'm telling you this now is because coming out of this crisis, there are clearly going to be winners and losers. And it's really tempting to believe that we or other someone paid to do this is going to have the ability to pick those in advance and to profit from it. The problem is that too is nonsense. And whilst I'm sure there will be someone who does well out of this crisis, trying to work out who in advance is almost impossible.
00:57: And in doing so, you'll take on more cost, more risk, and in trying to outperform, you're more likely to under-perform. Now, I recognize this years ago, and I actually coined something probably quite lame. I know it needs to catch on, but it's substance over stories. And the substance of the matter is the best way to participate in long-term growth, including coming out of a situation we find ourselves in, is to own the market and own it cheaply. Now, I know it is profoundly unsatisfying to hear that right now and in times like this, we want confidence, we want certainty, but there isn't any. You know, people will pedal it, this will become a thing. But the reality of the situation is the substance is, own it and own it cheaply. We at T&T, we tell our clients what they need to hear to achieve better long-term outcomes. That isn't always the same as what people want to hear, but we will continue to do that. So you want to know any more about this? Please head over to my website or go to our YouTube channel and you find some more videos. I thank you for watching.
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