Investing: Mental Toughness – October 2020 Update
03rd November 2020
Thank you for your patience
03rd November 2020
Investing: Mental toughness.
By Saftar Sarwar - Chief Investment Officer. Binary Capital Investment Management.
Hindsight is great, it is a great leveller. With hindsight everyone is a successful investor, forecaster and strategist. It becomes easy. Everyone becomes an expert. The real skill that often goes unappreciated is looking forward and making forecasts about the future, often bold forecasts. Not only making such forecasts but positioning the relevant investment portfolios as such to take into account such forward views, positioning portfolios with views aligned. This is especially challenging when such views are broad and bold and away from consensus – indices or peer groups, these views can often be long-term in nature. It may look easy to invest like this, in reality it is very difficult.
To general positive returns, returns significantly better than other competitors take considerable effort, intelligence and conviction. It is not easy. It is very easy to follow what others are doing, how they invest or look at the world. It is hard to be different. It is easy to be a ‘closet index-tracker’ or indeed invest via indices themselves.
It takes mental strength, resilience and great confidence to stay the course, it also requires having a low ego and a sense of humility to always be looking to be doing the right thing day by day, over days such actions will lead to results. Daily making sure our investment views and investment positions are completely aligned, always looking forward.
Having a patient investment capital mindset takes on a strong level of mental agility. Mental strength to have an ability to have full confidence that the investment thesis will play out as it is developed. Mental strength to ignore the prevailing general consensus and be different, different for the right reasons. Look at the uncertainty out there and make intelligent and long-term decisions around this. Mental strength if things change, if the thesis changes, you changed. This is not dogmatic investing, this is real investing.
In any such investment strategy there will be periods of under-performance, this is a given, the period could be short or even prolonged. We actually expect under-performance from time to time, it is indeed a validation of our investment strategy. It is during that time that mental resilience and toughness needs to be maintained and a resolve that the right strategy is being executed. As the saying goes: everyone is clever after the events. It is before the events, during the events that the real cleverness and insight occurs. With hindsight the good work seems apparent to others and obvious, it was never obvious years ago.
We at Binary Capital have a long-term approach to investing, amongst many people in our industry it is a fairly unique way of investing: high conviction, long-term, ignore periods of under-performance and only make changes when they need to be made, and not for the sake of ‘action’ or short term insights that are often not market material and usually random. It is in the long-term that the real investment winners arise. It is by undertaking all the investment research that we can look to deliver on such investment winning opportunities whether that be with investment fund choices or indeed our equity investing within our 30 best ideas proposition.
To the above end we do need to have a very focused and disciplined mindset. Monthly, quarterly numbers are relatively useless. We are not index managers, we do not watch the index closely (if at all) we care for making money for clients in a clear, consistent and transparent manner. Our investment returns bear out this investment philosophy and validates what we do.
The choice in our industry is very clear, do you want a level of uniformity surrounded by marketing and sales speak, or do you want something genuinely different, radical and prepared to look forward at all times and make a different to clients in the investment landscape for the short-term and long-term.
Vaccine November 2020
By Saftar Sarwar, Chief Investment Officer, Binary Capital Investment Management
This year has been one full of 24hrs news primarily around the COVID-19 pandemic – the pandemic of a generation. Such pandemic news emerged at the start of this year and further developed throughout the year. It has been a very challenging year.
In the UK we are emerging from lockdown 2.0. November appears to have been a positive turning point. It has been a month of regular ‘Monday morning’ vaccine updates and announcements, from Pfizer, Moderna and Astra Zeneca respectively. Surprising to many, we are very close to a roll-out of a usable, high efficacy vaccine by the end of this year or early into 2021.
The positive vaccine news had a dramatic impact on investment returns. During the month there was a significant movement away from growth/momentum equities and then back again. On the day of the Pfizer vaccine press release (Monday, 09 November 2020) within minutes we saw a massive growth stock sell-off into more under-valued, or so-called value stocks - this was the so-called ‘rotational trade’. Apparently, this was a 15 standard deviation event and in essence something that is an almost impossible occurrence – but it did happen! This trend continued for much of November albeit at different magnitudes. The month closed with both the US stock market and the US technology index (NASDAQ) at record highs.
Whilst the introduction of the vaccine(s) into the world is to be welcomed, how this will play out into 2021 economically and strategically is still very uncertain – the logistics and the efficacy of the vaccine towards vulnerable older people are still to be properly discovered. The uptake of the vaccine is also unknown. The vaccine has new science at the heart of it. There is still much uncertainty. There is political and economic talk of social normality returning by easter of 2021, I would expect that to be unrealistic and a somewhat optimistic expectation - the summer of 2021 seems much more likely. Will 2021 be a normalised year for economic growth? I doubt it, it will still in part resemble 2020.
Throughout the month of November, we remain committed to our unique investment strategy. It is pleasing to report such good performance for the month and indeed for the year to date. We are long-term conviction led investors, with a very patient capital mindset way of investing. We are a ‘concentrator’ investment solutions provider, our performance numbers in the short-term and long-term bear this out. Our focus is on scalable growth opportunities. By not having an inherent bias towards the UK has also helped in performance.
We now look ahead to 2021 and already have a focus on a few key variables: the US and China as investment drivers next year. We look ahead with optimism, complete focus, and absolute conviction.
By making an investment, your capital is at risk. The value of your investment depends on market fluctuations outside of our control and you may get back less than you invest. Past performance is no indicator of future performance.