The longer I’m in this business, the more I’m convinced that it’s forgetting the investment basics that ultimately brings down even the biggest and brightest of investors and money managers. It’s almost as if success has gotten to them, and the investment basics they learned as apprentices are no longer stressed. Or maybe they just forgot them, as one forgets to cross with the light or hold the door open for the person behind them even though they’ve known better since being taught those lessons as kids.
I’m reminded of an episode of the 1950s sitcom The Honeymooners, where Ralph Kramden (played by Jackie Gleason) is going to appear on a game show with a Name That Tune theme called The $99,000 Answer. With his trusted sidekick, Ed Norton (played by Arthur William Matthew “Art” Carney), accompanying him on the piano, Ralph studies every song there is to be studied until there’s no stumping him. Trouble is, before each song that Ed plays on the piano he leads in with the beginning of “Swanee River,” until one day Ralph has had enough and yells at Ed to stop playing it. The big night arrives, with a supremely confident Ralph proclaiming to the host at the outset of the show that he’s going to go all the way to the top question. The host sets him up beautifully as he explains the game, noting that the questions about the songs become more difficult as the monetary hurdles increase. What do you think the very first, easy question was for Ralph? It was to name the composer of “Swanee River”! Upon hearing a few bars of the song, a stunned Ralph couldn’t believe it. As time was running out and the announcer demanded an answer, Ralph exclaimed, in desperation, “Ed Norton?” “Oh, I’m terribly sorry Mr. Kramden,” consoled the host. As he tried to get Ralph off the stage by uttering several phrases, Ralph immediately used them in song titles he knew, along with the year in which they were sung and who sung them. But it was too late.
You get my point: not remembering the basics in any endeavor you undertake can have negative results, and let me tell you—investing in the stock market is no different in that regard. Don’t look so far ahead that you skip over the foundational investment principles outlined in this book. Don’t think that any measure of investment success you’ve achieved gives you a pass to stop remembering and practicing the seemingly simple market tenets you learned at the outset of your investment journey. Commit them to memory, and bring them into the field of investment battle each and every day. In the business of investing, no one ever outgrows the basics, and those who think they have leave themselves vulnerable to a harsh and potentially irreversible financial lesson. This is particularly true in down markets, which specialize in separating investors from their capital.
Relating this investment concept to life, how many times have we said that we “should have known better” or that we “made a stupid mistake”? What we’re really saying to ourselves is that we forgot the basics.
(To be continued...)
This excerpt is taken from “Relationship Investing: Stock Market Therapy for Your Money” by Jeffrey S. Weiss. To read other articles of this book, click here. To buy this book, click here.
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