Written by Mark Mobius, Executive Chairman, Templeton Emerging Markets Group.
Probably the most important lesson learned during the time I’ve been investing is the need to take a long view. In this day and age the speed of information and the volume of information are increasing at a rapid rate. The pressure to react to the latest news increases as a result of the avalanche of data. But it is vital to resist that pressure since we have found time and time again that knee-jerk reactions can be damaging to our portfolio health. The mass of investors tend to react and thus make mistakes in addition to increasing portfolio turnover, another detractor to performance since operating fees increase. Of course, ignoring the latest news and focusing on, say, the five year view of a market or company is a very difficult thing to do since you must admit that making the five year forecast is a huge challenge. However if we are to succeed we must make those forecast based on intensive research and creative thinking. Stock prices are determined not necessarily by what has gone before but what investors believe the future to be. There is a tendency to look to the past in order to predict the future. So when we are trying to forecast future earnings of a company one of the most important elements in any such investigation is the past earnings performance of the company. Despite how important we may feel this is, we need to admit that it is somewhat like driving a car by looking through the rear view mirror. If you do that while actually driving you are bound to end up in an accident. The same may not fully apply to forecasting company earnings but any forecast will be most importantly impacted by new and future developments rather than just the firm’s history. It’s this challenge which makes investing so interesting.
Mark Mobius will be speaking at FundForum International on Monday June 24th. For more information on the event, visit the FundForum International website
The post Lessons Learned from a Veteran Investor appeared first on FundForum - The World's Leading Asset Management Event Blog.