We all have our own philosophies on how we deal with life or our process for making decisions including investment decisions. Part of my make up is to try to live in the moment or realize that life is about the journey more so than the destination. Another aspect to living in the moment is understanding the moment.
As some readers may recall I am a huge sports fan and I am from Boston. By the time the Red Sox had won their first world series of the decade in 2004 the Patriots were already the Patriots and I commented to my brother (more of a sports fan than I am) the extent to which we were having a great run. Obviously the run continued for Red Sox, Celtics and Bruins, even the Boston Cannons won a Major League Lacrosse championship, and the Patriots are still the Patriots.
While this has been great it used to not be this way for Boston teams other than the Celtics and it is unlikely that the championships will continue at this rate. To me this makes it all the more emotionally satisfying to realize this is a heyday for the teams I have always rooted for.
This relates to investing and actively managing a portfolio. For the average portfolio manager (this applies to do it yourselfers) there will be periods where he has a heyday of being right about several things for some length of time and then other periods where little to nothing goes right.
When things are going especially well it is important to understand the moment and remember that we are not all of a sudden a lot smarter than we were last year. Likewise we are not all of a sudden a lot dumber than we were last year or six months ago. This speaks to understanding that "being correct" will ebb and flow and anyone who is at least average will go through more ups and downs like this in the future in their investment careers. It is good to not get too full of self when things are going well because that will turn and no one wants to be depressed during a rough run. I think the best is an even keel through all market conditions and personal periods of outperformance and lagging.
I think there will be at least one reader who might comment along the lines of how the above makes the case for index investing. Not quite. It may make the case for index investing for some people but others not. Like a personal philosophy on how to live life, how to invest is based on personal beliefs. Some people should index but it is not right for everyone.