Yesterday I had a nice conversation with a very thoughtful investor. He noted that while investing is pretty simple — buy low, sell high — people often confuse its simplicity for ease.
I love this notion. Because over the years, I have come to realize that investment success is predicated on some pretty basic principles. Depending on your strategy, success requires a varied combination of hard work, thoughtful valuation discipline and underwriting, and careful portfolio construction. As an investor, this enables you to find unique opportunities, buy investments to sell at a higher price at a later date, while ensuring that the distribution of profitable and unprofitable investments in a portfolio, on average, delivers a solid return. This sounds pretty easy, right? Nope. It’s not.
After analyzing the strategies and results of countless public and private investment strategies, I have come to realize that no matter your “strategy” or “angle”, making profitable investments, especially above-average investments, is not just hard, it’s extremely hard and getting harder in certain market segments. (However, to be fair, investing is not rocket science.) Yet, due to the seductiveness of investing’s simple nature, I am always amazed by those with limited experience in complex investments boldly doing so with the assumption that making money is easy.
When the history books are written on “Unicorns”, I believe it’s this confusion of investing “ease” that will be an interesting tale to tell.