Being Good at Suffering

“I’m not the strongest. I’m not the fastest. But I’m really good at suffering.” – Amelia Boone (the only 3-time winner of the World’s Toughest Mudder).

Tell me how good you are at suffering and I’ll tell you how good you can be as an investor.

If you’re like most people – the word “investing” conjures up visions of success and wealth – not suffering. But having a high threshold for pain is paramount in a field where there is no upside without downside, no reward without risk.

Every great investor has experienced periods of severe pain. This may come as a surprise to casual market observers because the media tends to lionize successful investors by focusing only on the end result: an eye-catchingly high rate of return over a long period of time.

But how did they get to that high return? This question is rarely asked.

Was a straight line up or a jagged path with many flat lines and down lines along the way?

For any long-term investor, it must be the latter, for drawdowns and periods of underperformance are inevitable.

What about the great Warren Buffett? I’m glad you asked.

From June 1998 through March 2000, Berkshire Hathaway’s stock declined by over 49%. If that weren’t bad enough, this decline took place during one of the strongest runs in history for stocks. The tech-heavy Nasdaq 100 Index advanced 270% during this period while Buffett’s net worth was cut in half.

“Value is Dead”

“Buffett is Broken”

“Has the world’s most famous investor lost his Midas touch?”

It’s hard to imagine today, but these were the declarations made and headlines written in early 2000.

Many value investors would give up, either on their own volition or the demands/withdrawals of their clients. Some would morph into growth/tech investors and others would leave the business altogether, scarred for life. It is hard to blame them. To stick with a value investing discipline through such a period required a tremendous amount of fortitude and an unbelievably high tolerance for pain. To continue to believe in a strategy that was deemed to be “broken” by all required a fiercely independent mindset and an almost stubborn determination.

What happened next? Berkshire Hathaway’s stock would bottom in March 2000 and advance over 70% by October 2002. Over the same time period, the Nasdaq 100 Index would lose 82% of its value and the S&P 500 would be cut in half.

A happy ending for the value investors who stuck to their discipline, but it wouldn’t be the last time they were tested, not by a long shot.

As I chronicled back in August 2015, it was once again a difficult time for value investors, having unperformed growth since 2006.

Biotech stocks were all the rage, having quintupled over the prior five years. Value investing was once again deemed to be broken: “it no longer works.”

What happened next? Small value would gain 32% in 2016 vs. a 12% gain for small growth and a 21% loss for biotech stocks.

Will it be only smooth sailing and calm seas for value investors from here?

No. Given enough time, it will be rough sailing in treacherous waters. That is true of value, momentum, and any other strategy you can think of.

There are always new tests lurking, always more pain and suffering to be endured. That is the nature of investing. If that sounds like too much of a burden to bear, I don’t blame you. Suffering is probably not on anyone’s list of New Year’s resolutions.

But suffer you must, if you want to grow in life, or achieve a higher return than a certificate of deposit (CD). For there is no growth without suffering, no progress without pain.

In 2017 I hope to suffer more and embrace the pain of moving outside of my comfort zone. This is only sure way I know of to grow.

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Related Posts:

Anomalies, Cycles and Inevitable Periods of Underperformance

Big Winners and Big Drawdowns

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.



Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts.  He is the co-author of four award-winning research papers on market anomalies and investing. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors and previously held positions as a Credit, Equity and Hedge Fund Analyst at billion dollar alternative investment firms.

Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and a Member of the Market Technicians Association. Mr. Bilello also holds the Certified Public Accountant (CPA) certificate.

You can follow Charlie on twitter here.

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