“I consider myself to be a farmer—not a hunter. And I think most people on Wall Street are hunters. They like to fell big beasts and I’m very comfortable planting a few rows and just tending to them carefully.”
– Tom Russo, Gardner, Russo & Gardner
Investing is often referred to as a game, or talked about as if it belongs in a casino. If you invest like a hunter, it absolutely is a game…and the odds are stacked woefully against you.
We all know the hunters. They are never shy about talking about the dragons they have slayed and are full of hypotheses, forecasts and opinions about the next big thing. They make investing sound very exciting and easy. To the hunter, investing is all about the next big score and the only way to win is to out-hunt everyone else searching for prey.
Wall Street’s mission is to turn everyone into a hunter. The more activity they create, the more they win. Not only does increased activity create a greater likelihood of mistakes, but more activity creates more trading commissions, so they win regardless of whether you win or lose.
Hunters always have an interesting story to tell, and they always have their finger on the trigger. Their wins are always the result of their otherworldly prowess and never about being in the right place at the right time. They confidently make investing seem exciting and fun, which is precisely why we see hunters again and again on TV and in the news.
Lost in the excitement of the big city lights are the farmers. Conservative, steady and patient, the farmer’s top priority is ensuring the proverbial farm survives each year. Often considered boring and out of touch, the farmer manages his or her portfolio through tried and true principles that have proven to stand the test of time.
Farmers do exactly what Wall Street doesn’t want them to do. Rather than attempting to predict what the climate will be like in a given year and betting on their seasonal predictions to come true, the farmer positions their portfolio in a manner that provides the greatest chance of a positive result regardless of the weather.
Instead of celebrating unexpected wins and bragging to friends, the farmer understands there will be leaner days ahead.
The farmer rarely experiments with the unknown and certainly will not bet the farm on a tip, as they understand the true cost of being wrong.
One of the most difficult things for an investor to do is sit still and be patient when the rest of the world seems to be passing you by. But the farmer knows what is going to give them the best chance of success over time and sticks to that strategy regardless of the latest trends and gimmicks.
The world’s most successful investors are farmers. This is certainly not true every month, quarter, or year, but virtually universal over time. As Steve Romick of FPA Funds puts it, “the best way to accomplish our goals is to accept short-term under-performance in exchange for long-term success.”
Contrary to the nonsense that we are inundated with, these investors understand it is not important to outperform each and every period, but absolutely essential to stay alive in a drought. Farmers hope for the best, while planning for the worst. As a result, they are often ignored when the markets are soaring, but are always the voice of reason when things get tough.
Successful investing does not require you to be a hunter, nor should it be the source of excitement in your life. Investing is not a game to win. Treat your portfolio more like a farmer and you will achieve much greater investment success over time.