What's the Point

Since it’s a new year, we thought it might be a good time to think about how we view time. It is important because it sets the frame for how we think about investing and returns.

This year like previous years, see many finance folks talking about their superior returns. The reason why is to gain your attention and thus have you believe that you should invest the way they do or have them do it for you. 

But if you highlight your outperformance over a set period then you should also detail your performance over every other timeframe. That's why they use the average because in most cases it hides the bad years. Bad year? Ah yes but over 10 years we have returned X%. Good year? Ah yes in 2025, we made X% and beat the market. 

The world’s greatest investor Warren Buffett has outperformed for over 50 years, but has experienced stretches where he has underperformed. It should be noted that Buffett has said he doesn’t compare his performance to any benchmark. One of the reasons why is because Buffett is a Kelly investor, meaning he invests differently to most of the industry and certainly different to the mainstream finance industry. However his “system” - the Kelly criterion works over time but the timing is unknown. It's much easier to sell the 8% average than the Kelly investment system where the answer is usually "it depends". 

But Buffett doesn’t carry on about outperformance or the underperformance, but the investing process. Is it logical? Are there supporting facts that back up the process? 

When advisers talk 8-10% annual returns they don't say, well there are times you'll earn -10% and times you'll earn 16%. And that is why where you start out and where you finish (the price/value equation) is so important. No average can do that. 

So we encourage you to think about time.  

Single point data like the average return is meaningless. It is a single data point which compiles all the other timeframes into a single point in time.

Buffett succeeds not because he is Buffett, but because he understood the investment process and how best to exploit it for maximum gain. His success is over years even though he has underperformed in shorter time periods. Conversely, you can look at Jim Simons who is also successful but uses a quantitative approach and his trades can last nanoseconds.

So looking at one year periods doesn’t tell you much about anything. I can tell you more about investing by looking at your principles and methodology than I can by looking at your returns.

When it comes to investing try to avoid getting trapped in some timeframe which distorts your views and drags you away from successful principles which work over time.