The ‘wild card’ in all this is one Buffett also alluded to – “the ability to keep emotions from corroding that framework”. It is worth labouring the point that human emotions evolved on the savannah, not in the dealing room. As fund manager Chris Clarke points out, fear and the likes of the fight / flight mechanism were the human evolutionary response to threats like sabre-toothed tigers. Humans have been running to and away from four-legged food sources (and sharp-fanged threats) for hundreds of thousands of years. Financial markets and the to and fro of securities price action have been with us for a few hundred years at most – we have not yet developed any evolutionary response, so the brain’s reaction to losing money on an investment that might yet come good is often crude and counter-productive. In the words of Sir John Templeton,

 “To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.”

 And in the words of John Maynard Keynes,

 “It is the long-term investor, he who most promotes the public interest, who will in practice come in for the most criticism.. For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion.”

David Fuller's view

I commend this issue to all subscribers.