Having covered Sin 2: Sloth in the previous article, I will be covering on Envy in today’s article.
Sin 3: Envy – Constant need to compare
In today’s competitive world, we have build up this constant need to compare ourselves with others. Just looking at Singapore, we can see this being cultivated since young. Parents comparing their children’s results/achievements at school with other kids and pushing their kids to do even better.
Bring it back to investing, how does envy affect one’s investments?
Gates Capital Management's Excess Cash Flow (ECF) Value Funds have returned 14.5% net over the past 25 years, and in 2021, the fund manager continued to outperform. Due to an "absence of large mistakes" during the year, coupled with an "attractive environment for corporate events," the group's flagship ECF Value Fund, L.P returned 32.7% last Read More
As value investors, our route to success is always not a fast one. While we may get lucky, but more often than not, we have to wait years before the value in our companies get recognised. Hence, in this process of waiting, there would be tons of people achieving success through other methods, e.g. trading or speculation. This lack of success may result in envy, causing resentment and perhaps even rage to build up. Such resentment or anger would cloud one’s judgement and prevent us from looking inward to examine if the mistake lies within ourselves. Instead, one may start blaming everything around him (the failure of value investing) instead of himself (the lack of patience).
This would result in the distrust in the value investing way, and perhaps deviation in the methodology. I find that in value investing there are a set of rules one has to follow. When one starts deviating from these rules, that is when mistakes starts occurring. The rules did not fail the person, but rather, the person failed the rules.
For myself, I am only human and I do feel envious too when I first started out. I would wonder why others were able to choose the winning stocks, while the value of my investments had not been recognised. There would be this bit of envy, where I wondered what did I lack compared to others and how I could make up for this inadequacy. However, over the years, I realised that success is only a matter of time. The main ingredient for such success is patience and conviction in the amount of hardwork and due diligence one has put into the analysis. It is through such experience that it has allowed me to build up a sense of nonchalance when I hear of someone doing better than me of having higher % gains. Never allow your envy to cloud your judgement as this would just derail one from the longer term plan.