By: Grover Grafton
Why it Matters?
Charlie Munger said it is often easier to lower expectations than to increase results, making low expectations but high hopes the key to a happy life. This is, of course, true, but as equity investors, we buy for one and only one reason: to make money. Therefore, you must be a pragmatic optimist at the time of any purchase, a general feeling that, if left unchecked, could be dangerous. So, a helpful guardrail is the Rule of 1 in 3.
This can help set reasonable expectations and leave you in a more level-headed state, ready for your next great investment!
The Three Rules of 1 in 3:
One in three positions will perform in an unexpected manner.
One in three years you will lose money.
One in three years you will underperform the market.
Simple, yes, but don't forget: great things happen when simple, good, ideas are taken very seriously.
Which rule hits home for you?
One in three positions will perform in an unexpectedly.
One in three years you will lose money.
One in three years you will underperform the market.
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