No. of Recommendations: 24
Much of the results we achieve in investing are out of our control. We might not like the policies put forth by politicians or the Fed, but we are married to them for better or worse. It is fine for us to criticize the actions that are out of our control, as long as we do not lose focus on what we can control. Clearly we should spend the majority of our time on what we can control.

David Merkel has an excellent financial blog called “The Aleph Blog.” I read the blog on a regular basis and almost always learn something. Yesterday, David has a succinct post entitled “Focus on what you can Control.” [1] He lists five points:

1. You can control your own behavior. You can’t control the behavior of others, whether it is those who invest alongside you, or manager behavior, or that of clients who invest more and less at the wrong times. Optimal behavior might mean buying things out-of-favor after the fury of selling has gone cold.

2. If you are a manager, you can guide, but not control client expectations. You can educate them on your willingness to take risk, but you can’t control their emotions.

3. As a manager, you can tell investors the mandate toward which you are managing — and then you must manage within it, because your investors expect it.

4. You must match the liquidity of investments to the need for liquidity. Value investors must stress patience. Hot money investors must keep things liquid. The same applies to time horizon.

5. Market conditions may be depressed or ecstatic. You can’t control movements in the mood of the market, but you can adjust your position so that you can benefit from likely future change, if valuation measures are extreme.

I think these are good rules to invest by. Yoda confesses that he has not always focused properly on items under his control. David’s points provide new inspiration that hopefully will inspire us all to be better investors.



[1] The Aleph Blog: Focus on what you can control
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