Following On

Charlie Parker was considered the greatest saxophonist in the world.  He is also remembered for his response to a question “How can someone play those beautiful solos like you?”? His response was “learn everything and then forget it”.

It took me a while to grasp the meaning. What he was saying was that after you have learnt most of what there is to learn about something, it then becomes much simpler. You start to see that much of what we know is not that important. The basics can carry you a long way but most of us believe that complexity leads to better results. The more we know that better of we will be. 

The older I get the more I realise what Charlie was talking about. After you read 100’s of books and 1000’s of articles and academic papers, it really boils down to a few simples rules or principles for successful investing. After all, Warren Buffett repeated the same stories for 80 years and people still write books about how he succeeded and seek to reveal his secret formula. 

In a world where finance and media companies compete for your attention and money, they believe that greater complexity and drama will reap rewards. But the truth is simplicity wins most times. 

Charlie Munger, Buffett’s partner said it was easier to avoid dumb things than try to be smarter than everyone else. And this is a great way to approach investing. Trying to pick individual stocks is extremely difficult once you realise the odds of success over an extended period of time is virtually impossible. 

I believe if we were told this first up, we would quickly realise why ETFs are such a great way to invest for those of us who know we ain’t no Buffett.  

So when you feel the need to add another stock or do something, see if you can catch yourself before acting. Is it part of your plan? Does the expected result, come from a simple principle like buy low sell high or are you just increasing your activity for other reasons?

Either way, it is important to be aware of what you are doing. At some point, you will see what Charlie Parker and Warren Buffett are talking about.