STREET DOGS

FROM Ben Carlson at A Wealth of Common Sense: Bob Maynard is one of the best investors you’ve probably never heard of. The thing that sets him apart from institutional peers is the fact that he runs a more conventional portfolio that eschews the complex, illiquid model that many of the large pools of capital now run.

An interesting aspect of his philosophy is how this more conventional way of managing money in the institutional investment community is now an outlier. A simple approach is something of a contrarian stance. Maynard says there are three ways to make money in the markets: option #1 is physically exhausting, you work harder than everyone else; option #2 is mentally exhausting, you’re smarter than everyone else; option #3 is emotionally exhausting, you need patience with a long-term strategy and mind-set.

Most professional investors assume that they fall into option #2, while many also try their hand at option #1 to make up for any shortfall in smarts. My feeling is that there are always going to be people who are smarter than you and working harder doesn’t necessarily lead to better outcomes. Therefore, the third option offers the best chance for the majority of investors to succeed. But an emotionally exhausting investment approach has its own challenges.

Maynard says this is the type of plan that takes five to 20 years to produce the best results. You have to be willing to accept volatility and abandon the quest for short-term alpha.

It’s also boring and not as exciting to take a longterm stance in the markets. And maybe the hardest part of all is that it’s much easier to do something rather than nothing even when doing nothing is the right move the majority of the time.

Michel Pireu — e-mail: pireum@streetdogs.co.za