One of the keys to consistent high performance is ensuring that you focus on the process of decision-making more than on the results of your decisions. Picture: 123RF/ALEKSANDR DAVYDOV
One of the keys to consistent high performance is ensuring that you focus on the process of decision-making more than on the results of your decisions. Picture: 123RF/ALEKSANDR DAVYDOV

One of my great passions is coaching people to make better decisions in high-stress situations.

Managing money in a stock market crisis is definitely a high-stress situation. The stress gets much worse when you add damaging political leadership to bad investment markets.

Unfortunately, people make terrible investment decisions when they are under pressure. That means we need to find ways to manage our emotions when the world is going crazy.

I believe we can learn a lot from studying how great professional sports coaches get their teams to perform at a consistently high level over long periods of time.

One of the keys to consistent high performance is ensuring that you focus on the process of decision-making more than you focus on the results of your decisions. You might think it is silly to focus on process rather than results when you make an investment, but process is critical.

Results don’t matter in the short term

Gary Kirsten and Paddy Upton were a hugely successful coaching unit that achieved great results (they won a Cricket World Cup with India) and they did this by not focusing too much on the outcome of matches.

They were more concerned about how their team played during each game (the process) and they were less concerned about the result of each match. The reason for this focus on process? 

Sometimes you could win or lose through luck. Consider the impact of an unexpected cloudburst or an opposition player who delivers the performance of his career on the day he plays you. It is impossible to plan for luck. That means it is pointless to focus on results without focusing on how those results were achieved.

Investing is very similar to Test match cricket. If you make sound investment decisions on a sustained basis, you are likely to be successful as an investor. Your investment results will not always be spectacular and sometimes you will simply be unlucky.

To ensure that you do not rely on luck to achieve good results, it is more important to focus on your investment process rather than your results. Anyone can be lucky with one investment decision that makes them a lot of money.

This happens often in the professional investment industry where a new “superstar” asset manager achieves incredible results in a year when all his peers had terrible results. Unfortunately, many of these superstar managers fizzle out after a few years because they were not able to replicate their results.

The only conclusion I can reach about these one-hit wonder managers is that their initial success was not a result of skill; they were just lucky. The problem with luck is that it turns against you as quickly as it might help you.

‘I told you so’ commentators

A great investor should be more concerned with mistakes than successes. Mistakes are great teachers, but rapid success can lead to arrogance, which is often the downfall of investors. That leads us to market commentators and their predictions.

The worst kind of commentator writes “I told you so” articles where he tells you about the times his predictions worked out. Naturally, this type of commentator never writes about the large number of mistakes he made.

Novice investors will believe everything this person writes and will probably lose a lot of money over time. I prefer to focus on commentators who give me the tools to make better decisions in the future.

Interested in gold or tech shares now?

This sets the scene for investors who want to buy gold or tech shares now. Here is a bit of context: the NYSE FANG+ index (consisting of companies such as Facebook, Amazon, Apple and Netflix) has jumped by 90% in 12 months.

Gold mining companies on the JSE are up nearly 200% over 12 months. It is no surprise that my Twitter feed is full of people asking me if they should buy gold and/or tech shares now.

Buying either of those sectors is risky at the moment. It is impossible to value gold and tech shares, which are now dreadfully expensive.

Therefore, any decision to buy them at these levels is probably not based on a reliable investment process but rather on the hope that they will go even higher. A reliable investment process would cause investors to consider alternative investments such as the MSCI world index or the MSCI emerging markets, which offer better value and therefore have a more reliable chance of generating growth in future.

If I do convince myself to buy when a share or sector is doing well, I do so slowly and over a longer period. And I will definitely buy other sectors or geographies to spread my risks and limit my losses.

This strategy is not perfect, as it means that I will own investments that are not performing alongside other investments that are doing well but that is the price of diversification. In these crazy times, diversification is critical to a sound investment process and that is the key to long-term wealth creation.

• Warren Ingram is the co-founder of Galileo Capital. You can follow him on @warreningram.

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