STREET DOGS

Many investors persist in the investment world’s version of a search for the Holy Grail: the attempt to find a successful investment formula. It is human nature to seek simple solutions to problems, however complex. — Seth Klarman

According to one Grail account, continued war is waged in heaven between God and Satan. The Grail has been placed in the middle of the conflict by neutral angels. It exists in the midst of a spiritual path between pairs of opposites. Over time this territory of concern has become a wasteland.

Joseph Campbell maintains that the wasteland symbolises the inauthentic life most of us lead; typically doing what other people do, following the crowd and doing as we’re told. Thus the wasteland represents our lack of courage to lead our own life.

The financial equivalent of the Holy Grail is alpha — returns above the appropriate risk-adjusted benchmark. Applying Campbell’s claim regarding the wasteland to investing is easy. Most investors follow the crowd. And while those who follow the crowd might make money during long trends, only those investors who think and act independently are likely to succeed in the end.

Most investors know this. So what’s holding them from breaking free? The short answer is any number of different things. Perhaps the most common, though, lies in thinking that the Holy Grail can be found in hot entry techniques — while most of the money is made through intelligent exits. Something that requires being totally in tune with what the market is doing rather than what others are doing.

When it comes to investing (as in life) the secret to the quest for finding a path between the pairs of opposites (profit and loss) lies in having the courage to go your own way, and avoiding where others are going wrong.