Whatever you want me to be
A swan song of bad investors is the idea that if you only owned the best stocks at the best time, you could achieve outsized returns and retire early, live your dreams, be a hero, etc etc.
This hope is pervasive and persistent. I have seen no indication that it is diminishing.
I would compare this notion to trying to use a net to capture only Mandarin Dragonet fish from the entire Ocean.
Catch all of them, and only them, and don’t miss any. And then do it again next year.
A better, more achievable idea is to use repeatable strategies that may quell our behavioral desire to be different, or special, or better (let’s call a spade a spade here) that also has a chance to capture some of the impossibly magical performance we are all seeking in our ape brains.
One strategy to do so is using price momentum. Broadly, this means buying stocks that have risen in price over some recent time period, like the trailing 12 months.
An anecdote about momentum from Jack Vogel of Alpha Architect on Corey Hoffstein’s podcast caught my attention last week. Jack talked about using momentum during the internet bubble of 1995-2001.
Paraphrasing, a momentum strategy would have owned internet stocks - all the really hot NASDAQ ones that are mostly gone or worthless today - for quite some time. As conditions and prices of these stocks decayed, momentum told us to look elsewhere - Jack describes them as “old-school industrial firms” - which, understandably, were momentum leaders while the bubble was bursting.
Offense or defense, internet or industrials, hot or cold. Whatever you want me to be.
What a great notion - a strategy that will be whatever you want it to be. A chameleon of sorts. My takeaway is that it is plausible that one can have her behavioral cake and eat it too.