One of the hardest things to learn as an investor is to be comfortable with discomfort. The logic flies in the face of most everything we are taught as well as our fundamental instincts for self-preservation. But to be successful as an investor, you have to accept the fact that you will feel uncomfortable. The very reasons for your discomfort, in fact, are where the most opportunity lies.
We recently read an article that does an excellent job of explaining the importance of getting comfortable with discomfort. “Every Great Investment Hurts,” by Morgan Housel, weaves together examples that include the recent retirement of Jeff Immelt, CEO of General Electric, a hypothetical pitch by Uber or Lyft to the Shark Tank panel, Howard Mark’s classic matrix for investment decision-making, and lessons learned by a Navy SEAL preparing for the Bin Laden raid.
Housel’s lesson: Success requires “a willingness to make decisions that don’t make sense to others, specifically because the gap between your check and consensus is where outperformance lives. In most competitive markets, it’s where any results live.” Discomfort is a prerequisite for success.
In investing, discomfort takes many forms. Market volatility is uncomfortable. Underperformance, however short-term, is uncomfortable. Negative media attention is uncomfortable. Hearing about different investment strategies may be uncomfortable.
But each of these examples is also an opportunity to capture value and reinforce the logic behind Warren Buffett’s advice to be “fearful when others are greedy and greedy when others are fearful.”
At Sage, our job is to help our clients become comfortable with discomfort. Research, diversification, and discipline are some of the special tools we bring to the table that enable us to help our clients accept periodic discomfort so that emotions don’t push them off course. As Housel states, “every good investment hurts” – at some point or another.
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