The One Guarantee in Investing

Amar Pandit , CFA , CFP

Last week, I wrote about “The Art of Investor Construction” and an equation that is extremely important for every investor to realize.

At the same time, there is an equally powerful force at play that we must be all aware of.

The biggest Disclaimer in investing is “Past Performance does not Guarantee Future Performance or Past Performance does not reflect /assure /indicate Future Performance.”

However, there is one thing that is guaranteed when it comes to investing. “Past Behavior is a Guarantee of Future Behavior”.

The question to ask yourself is “How did I behave during the previous market corrections or crashes?” Here lies the seed of our future behavior. The next question then is “Do I wish to change or do something about it?

The key to future investing success lies in the following:

a. An awareness of your behavior during previous market corrections. If you were calm and composed, pat yourself on the back. Keep doing whatever has worked for you. However, if your behavior made you do things you should not have, points b and care for you.

b. Your willingness to do something about it like seeking the counsel of a professional.

c. Not repeating the past behavioral mistakes.