Investors repeatedly jump ship on a good strategy just because it hasn't worked so well lately, and, almost invariably, abandon it at precisely the wrong time.
Interpretation
This quote emphasizes the importance of patience in investing, warning against abandoning a promising strategy due to temporary setbacks.
David Dreman highlights a common mistake among investors who often give up on good strategies when they face short-term challenges. This impulsive behavior frequently results in exiting positions at inopportune times, suggesting that successful investing requires sustained commitment and the ability to resist emotional responses to market fluctuations.
In practice
During a finance seminar, this quote can illustrate the pitfalls of emotional decision-making in investments.
Investors should remember that their scorecard is not computed using Olympic-diving methods: Degree-of-difficulty doesn't count. If you are right about a business whose value is largely dependent on a single key factor that is both easy to understand and enduring, the payoff is the same as if you had correctly analyzed an investment alternative characterized by many constantly shifting and complex variables.
Whenever you hear a discussion about the short-term swings in any given stock's price, your immediate thought should be whether it matters to why you are investing.
Time is on your side when you own shares of superior companies.
It seems to me - particularly for these retirement-plan investors, the vast majority of whom are not particularly financially sophisticated - by far the best way is to invest in index funds.
Investing is the intersection of economics and psychology.
Investing is a virtuous habit best started as early as possible.
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