CFA, Goals-Based Investing, Published Articles

On Horses, Tractors, and Markets

Growing up on a cattle ranch in central Texas, I developed a certain respect for the tools of the trade. Horses, tractors, trucks, trailers, bailing wire, and duct tape we all daily-use items for us.

Each tool has its purpose, of course, and each tool has advantages and disadvantages for a particular job. Take, for example, the contrast between horses and tractors.

As you might well imagine, you can get quite a lot done with a tractor. You can plow a field, fix fences, haul hay. But the best thing about a tractor is that you can get up every morning and turn it on, do your work, come home, and turn it off. So long as it has fuel, it will do what you tell it to do.

You can also get a lot done with a horse. Horses have different advantages, like getting to those hard-to-reach places on your land. Their agility makes them particularly good at herding other animals. But horses are bigger and stronger than we are and unlike tractors, they have a mind of their own. If you wake up to a horse who has decided she isn’t going to work today, there really isn’t much you can do about it!

One of the biggest mistakes I see investors make — especially professional investors — is to treat financial markets like tractors…

[Read more at Enterprising Investor…]

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