“I like the term “weighted” because it alone represents several qualities that make a good investor. When we talk about the adjective “weighted”, the Larousse dictionary defines it as follows: “To be well balanced, calm and moderate in one’s opinions or judgments.” As for the verb “to weight,” Larousse defines it, among other things, as follows: “Proceed with the weighting of the variables used in the calculation of an index, a grade.” The term therefore combines the qualities essential to investment success – calm, moderation, and balance – with the ability to weigh several often-contradictory variables to arrive at a rational conclusion. For me, a weighted investor is a good investor.”
In our investment management, the beginning of the year is typically a period of reflection during which we look back on the major events of the last year, on the important decisions that were taken, on our good and bad moves, and on the prospects for the coming year. In this context, it seems to me that the qualifier “weighted” should be integral to our approach to the stock markets, the management of our portfolios and the possible acquisitions of new stocks.
Weight the News. I am not a fortune teller, far from it, but I am already warning you that 2024 will be marked by a lot of negative news. It is easy to make such a forecast because the news is typically negative. It’s like I’m predicting that in 2024, stock markets will be volatile. Long-term investors should remember that the media thrive on bad news. Furthermore, good news (and there is some) generally happens very gradually, without us realizing it from one year to the next – this is the case, for example, of the long-term trend of the general enrichment of the population.
Weight Your Portfolio. One of the problems we often see with self-directed investors is that they tend to overweight certain securities in their portfolio. Good management of an investment portfolio is based above all on diversification. Excessive weighting in a few stocks is often symptomatic of excessive confidence.
Weight Your Decisions. In 2023, we acquired two new stocks in our managed portfolios, which is a fairly typical year for us. I continue to believe that it is better to be idle than hyperactive on the stock market. Before making the decision to buy a new stock, we typically take a few weeks to review the company, its long-term prospects, the risks facing its business model, and the valuation of its stock, etc. In other words, before proceeding with the purchase, any new stock must appear to us to be significantly more attractive than the least attractive of our existing stocks.
Weight Your Enthusiasm. In my mind, being weighted means being neither too optimistic nor too pessimistic about the markets or specific stocks. Although it is difficult, an investor should try to remove all emotion from their decision-making process and rely on numbers and facts.
Weight Your Expectations. Over the long term, stocks have provided a compound annual return of almost 10%. Aiming significantly more than 10% in the long term is illusory and potentially dangerous. Additionally, annual stock returns are particularly volatile – the return of almost 10% is far from linear; you must therefore be prepared to experience years of negative returns occasionally. Volatility is the price you pay for the attractive returns offered by stock markets over the long term.
Hoping that this text can guide you in establishing your New Year’s resolutions. Have a good year!
