Investors repeatedly jump ship on a good strategy just because it hasn't worked so well lately, and, almost invariably, abandon it at precisely the wrong time.
Interpretation
This quote emphasizes the importance of patience in investing, warning against abandoning a promising strategy due to temporary setbacks.
David Dreman highlights a common mistake among investors who often give up on good strategies when they face short-term challenges. This impulsive behavior frequently results in exiting positions at inopportune times, suggesting that successful investing requires sustained commitment and the ability to resist emotional responses to market fluctuations.
In practice
During a finance seminar, this quote can illustrate the pitfalls of emotional decision-making in investments.
If you are predisposed to be patient, disciplined and psychologically appreciate the idea of buying bargains, then you're likely to be good at it. If you have a need for action, if you want to be involved in the new and exciting technological breakthroughs of our time, that's great, but you're not a value investor, and you shouldn't be one.
Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.
Just because you buy a stock and it goes up does not mean you are right. Just because you buy a stock and it goes down does not mean you are wrong.
Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.
Investors should remember that their scorecard is not computed using Olympic-diving methods: Degree-of-difficulty doesn't count. If you are right about a business whose value is largely dependent on a single key factor that is both easy to understand and enduring, the payoff is the same as if you had correctly analyzed an investment alternative characterized by many constantly shifting and complex variables.
You shouldn't just pick a stock - you should do your homework.
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