Investing is not just about making good picks. Its also about conviction: trusting your judgment and staying the course. Investments rarely go straight up after you buy them. There are plenty of reversals, periods of drift, and contrary opinions that can weaken your resolve.
Take the conviction displayed by Nandu Narayanan, manager of the top performing fund in Canada: CI Global Opportunities Fund. Its up 102.1% over the past year. Thats an amazing gain for a period when stock markets have been floundering. But Narayanan runs a hedge fund and as one might expect, hes up so much because hes short securities hit by the subprime crisis, such as asset-backed commercial paper and subprime loans.
Narayanan is a top-down investor who saw the mess coming. In fact, he had his positions in place quite a while ago and has had to endure poor returns for two years before seeing a payoff: his fund lost 3% in 2006 and earned only 0.9% in 2005. “The fact that we did not make money did not change our view,” Narayanan told a reporter a few months ago. “So we kept these trades on, and finally it’s beginning to pay off.”
But do your homework. That’s how one gets not only conviction that can stand up to the challenges but also is more likely to be right than wrong.
Blogs & Comment
Investing with conviction
By Larry MacDonald
Investing is not just about making good picks. Its also about conviction: trusting your judgment and staying the course. Investments rarely go straight up after you buy them. There are plenty of reversals, periods of drift, and contrary opinions that can weaken your resolve.
Take the conviction displayed by Nandu Narayanan, manager of the top performing fund in Canada: CI Global Opportunities Fund. Its up 102.1% over the past year. Thats an amazing gain for a period when stock markets have been floundering. But Narayanan runs a hedge fund and as one might expect, hes up so much because hes short securities hit by the subprime crisis, such as asset-backed commercial paper and subprime loans.
Narayanan is a top-down investor who saw the mess coming. In fact, he had his positions in place quite a while ago and has had to endure poor returns for two years before seeing a payoff: his fund lost 3% in 2006 and earned only 0.9% in 2005. “The fact that we did not make money did not change our view,” Narayanan told a reporter a few months ago. “So we kept these trades on, and finally it’s beginning to pay off.”
But do your homework. That’s how one gets not only conviction that can stand up to the challenges but also is more likely to be right than wrong.