Controlling What Can Be Controlled

I had a discussion with one of our investors on this topic over the past few days. Should we be securing our portfolio against Trump’s threats? Is there a risk that the U.S. dollar could depreciate significantly, and should we protect ourselves against it?

In my view, an investor should try to control what they can control and ignore as much as possible the rest, which is not controllable.

Here is an excerpt from my book Advantage Equities that addresses this topic:

“I tell our investors and colleagues repeatedly that our job is primarily to find quality corporate stocks at good prices. Next, our task is to build strong and appropriately diversified portfolios. For the rest – the economic situation, interest rates, elections, unemployment rate, etc. – we shouldn't take it too seriously.

My son's tennis coach told him a crucial truth for any tennis player. He can only control four facets of his game: “the way he plays”, which includes his style of play, the strategy he uses and his technique; “his training”, both on and off the court; “his preparation”, which includes nutrition, studying his opponents, mental preparation, etc.; and “his attitude”. Everything else – the playing surface, the performance of his opponent, the temperature, the wind, the refereeing – is made up of so many elements beyond his control. He should therefore not worry about them, because they are anxiety-provoking and likely to disturb his concentration.”

It is tempting to act every day to adjust to the geopolitical situation. In my view, it is a mistake. As we have seen over the past few days, the environment is too volatile and unpredictable to try to adapt to it.

We must therefore focus our efforts on what we can control.

For me, this means focusing on the companies we hold in our portfolio, on their financial results, their strategy, their financial health, their ability to adapt to a changing environment, as well as on the valuation of their stock.

Next, I can conduct research to identify attractive opportunities among companies we do not currently hold in the portfolio. The high volatility of equity markets in recent months is likely to create interesting opportunities, and I want to take advantage of them.

I can also ensure that our portfolio is well diversified and does not have excessive exposure to certain risks. I am thinking of risks related to artificial intelligence, but also those associated with trade tariffs, interest rates, exchange rates, an economic slowdown, war, etc.

Such a focus is not easy to maintain when headlines continue to astonish and surprise us. However, like the tennis player, I must constantly remind myself that all my efforts must be directed toward the elements I can control—the rest is essentially just noise.

Philippe Le Blanc, CFA, MBA 
Chief Investment Officer at COTE 100