Active investors have to be confident; to do better than most, you have to depart from the crowd.

Investing is challenging.   Active investors have to be confident.

Establishing and maintaining an unconventional investment profile requires acceptance of uncomfortably idiosyncratic portfolios, which frequently appear downright imprudent in the eyes of conventional wisdom.

To do better than most, you have to depart from the crowd. 


1.  Be greedy when others are fearful, be fearful when others are greedy

• All great investments begin in discomfort, since the things everyone likes and feels good about are unlikely to be on the bargain counter. 
• But to invest in things that are out of favor – at the risk of standing out from the crowd and appearing to have made a big mistake – takes confidence and resolve. 

2. Hold onto a position when it declines and add to it at lower prices

It also requires confidence to hold onto a position when it declines – and perhaps add to it at lower prices – in the period before one’s wisdom becomes clear and it turns into a winner.


3.  Holding a highly appreciated investment that still has upside potential (long runway)

And it takes confidence to continue holding a highly appreciated investment you think still has upside potential, at the risk of possibly giving up some of the gains to date.

Reference:

In investing, uncertainty is a given – how we deal with it will be critical. Read Howard Marks’s latest memo, in which he discusses the value of understanding the limitations of our foresight and “investing scared.”

https://www.oaktreecapital.com/docs/default-source/memos/uncertainty.pdf