In his recent interview on the Rational Reminder Podcast, Ken French was asked how he evaluates his investment decisions. Here’s his response:
When I think about the quality of the decisions I’ve made. I have spent most of my life studying empirical data and what I know is volatility, the uncertainty, the unexpected part dominates most outcomes. Not all of them, but most outcomes in my life are dominated by the unexpected part.
So when I want to judge, let’s focus on investing coz that’s what I know well, when I want to judge the quality of an investment decision I’ve made I don’t pay much attention to the outcome. I pay attention to did I make a good decision based on the information I had at the time. The outcome that’s dominated by things I can’t forecast.
So it would be crazy for me to say oh great look at this I made a great decision or, oh darn I made a stupid decision here. Now presumably I made a great decision based on the information I had when I made the decision but the realization, what actually happens, is going to be dominated in most situations by the part of the information I never had.
The coronavirus, I keep coming back to that because it’s dominating the news these days. But it doesn’t dominate the way I evaluate my investment portfolio. I certainly regret the fact that I’m a lot poorer today than I was three weeks ago. That’s too bad but I don’t say, oh wow how crazy could I have been to invest in that portfolio.
I look back and I say no that was a perfectly sensible portfolio I invested in three weeks ago. It’s too bad that we got all these bad data over the course of the last three weeks. It’s not my fault I didn’t know anything. I don’t have to excuse myself to anybody else but I do have to look at myself and say is there something I want to change here. No, for my money there’s nothing I want to change here.
You can listen to the entire interview here: Ken French – Rational Reminder Podcast.
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple: