Thursday, December 2, 2010

Winston Churchill's Big Black Dog - Biggs - Trading

In Mr. Biggs book, Hedgehogging, he discusses the periodic bouts of depression that Winston Churchill would have.

“Winston Churchill, whose career had its ups and downs and also was plagued with bouts of depression, spoke of the huge, foul-smelling black dog with breath like the sewer, which appeared uninvited and sat heavily on his chest, pinning him down.”

Well, in all my years of trading, I can empathize with Mr. Churchill. That big, black dog is now visiting me and sitting on my chest.

All professional money managers and traders understand that there will be times when they underperform. Mr. Buffett, I believe, said that it can be up to 30% of the time that managers underperform. Mr. Biggs discusses the frustration money managers have with their investors when they do not perform well. As soon as a fund does not perform well, investors usually take the money and run, instead of waiting and being patient. Investors immediately begin to search for someone else who can make them money.

Generally, the good money manager is one who performs well, on average, over a long time frame. Mr. Biggs argues that investors would probably be better off staying with a manager with a proven long term record, rather than going out and searching for superstars and returns, just because of a bad year.

Just some food for thought…

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