As I was reading this article I couldn’t help but think of investor envy.
The writer describes his life as a trader. He was fairly successful in an absolute sense, but relative to his peers he began to lag. This was so frustrating that he eventually reached the point where he “only paid attention to one metric – relative performance”. He then goes on to assert how viewing success through the relative return mindset was a recipe for failure.
In many ways this parallels how investors feel when their neighbor puts up higher returns than they do. The question many investors ask themselves is “why am I not generating returns that high?”
That is the wrong question to ask. Maybe the neighbor has a huge position in one security or is heavily allocated to risky assets or has leveraged up the portfolio or maybe he or she is just a fantastic tactical trader. Regardless of the answer, the reality is the how/why is totally irrelevant. Investors need to focus on their goals and objectives.
Further, investors should be more concerned about risk. Before considering gaudy return projections sit down and think: what can you lose and is it worth it?
As an investor that is how you have success in the long-run, avoid excessive risk taking, and sleep easy.
