Tuesday, February 15, 2005

Summing it up

Peter L Bernstein in an interview last year summed up the essence of investment intellect. The best investors understand the limitations on their ability to consistently forecast future markets. Good investors and investment fiduiciaries will nevertheless pay attention to a wide range of investment perpsectives and forecasts. This enables them to position their portfolios to be most effective across that universe of future outcomes.

  • Question: Over the course of your career, what are the most important things you'd say you had to unlearn?
  • Bernstein: That I knew what the future held, I guess. That you can figure this thing out. I mean, I've become increasingly humble about it over time and comfortable with that. You have to understand that being wrong is part of the process. And I try to shut up, you know, at cocktail parties. You have to keep learning that you don't know, because you find models that work, ways to make money, and then they blow sky-high. There's always somebody around who looks very smart. I've learned that the ones who are the most smart aren't going to make it. I don't know anybody who left investing to become an engineer, but I know a lot of engineers who left engineering to become investors. It's just so infinitely challenging.

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