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Canadians have just suffered through two overtime losses in gold medal hockey games. Goal posts, missed breakaways and bad checks all played a part. The line between winning and losing was ridiculously thin.
Investing is like sports in this regard. The line between profit and loss, great and average, and bullish and bearish is razor thin, even though commentaries usually paint everything as being decisive, and having a clear cause and effect.
There’s a big difference between sports and investing, though. For investors, there’s no final buzzer or sudden-death overtime. The game keeps going. Winners and losers are declared at quarter-end and year-end, but it’s meaningless in the context of what you’re trying to achieve. What worked last year and made the numbers look great may be a detractor this year.
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Longer-term results are the only thing that matters. A winning stock or fabulous year will contribute but won’t show up on a chart of your 10-, 15- or 20-year returns. The flukes and upsets disappear into the bigger trend.
I’m always careful about bragging (or commiserating) about what happened last quarter or last year, because of how quickly things can change. Here are other examples about how easy it is to go from one side to the other.
Narratives
Short-term stock market moves are all about narratives. For instance, one month the world is running out of copper, and then AI is going to destroy software companies, and this month, it was Jevon’s Paradox making everyone bullish on AI again. And regarding the Middle East war, the energy markets seem to have a different tone almost every day.
Robert Shiller, the American economist and academic, wrote a book called Narrative Economics: How Stories Go Viral and Drive Major Economic Events. If you think monthly economic data is unpredictable and prone to revision, narratives around the economy and capital markets are even flakier. They can turn on a dime.
I’ve used this example before. At the beginning of 2025, Apple AAPL-Q was falling behind in the AI race, and the stock was lagging other mega-tech stocks. Later in the year, when concerns about a data centre spending bubble took hold, Apple became the anti-AI stock and regained the lost ground. Apple’s approach and positioning didn’t change, just the narrative.
Fear and greed
I use investor sentiment as a reality check and risk management tool. I follow Warren Buffett’s simple advice, “Be fearful when others are greedy and be greedy only when others are fearful.”
Unfortunately, sentiment indicators are bouncing around more and getting harder to read. The difference between greed, when buyers are highly motivated, and fear, when sellers are more urgent, can flip from week to week. All it takes is a few good or bad economic statistics, a couple weeks of strong or weak markets, or a change to an important narrative.
Good and great
It’s said that a great fund manager gets their stock picks right 60 per cent of the time. It’s not as simple as that, but the point is valid. Every portfolio has some stars, some dogs and a bunch of stocks in between. Two funds that have essentially the same holdings can have vastly different short-term returns based on a couple more stars or fewer dogs, or by having different allocations to the same set of stocks.
The hot managers garner most of the attention and appear to be smarter, so knowing how tenuous that brilliance can be, I try to watch and talk to managers on both sides of the industry medians.
Trust the process
Good sports teams like to talk about process. When they’re winning, it’s because they stuck to the process. If a few years go by and a championship doesn’t come, however, the process gets tossed out and they start again. It’s called rebuilding.
You shouldn’t be too quick to rebuild your investment process, though. You’re playing a game where there’s no end and the goalposts keep moving. Perceived success and failure can bounce from one side of the line to the other, influenced by narratives, surprises and extreme behaviours.
The results you care about are measured in decades and are tightly linked to having a plan, being disciplined and consistent, and controlling costs. Along the way, you’ll dance on both sides of a very fine line.
Tom Bradley is a portfolio manager with Purpose Investments, co-founder of Steadyhand Investment Management, a member of the Investment Hall of Fame and a champion of timeless investment principles.