It’s one thing to understand intellectually that, to earn market returns, you must first traverse the peaks and valleys that stand between you and your desired destination. It’s another thing entirely to keep going when you’re in a trough of uncertainty, wondering what brought you there to begin with.
In his video, “Investing for the Long Haul,” AQR Founding Principal John M. Liew describes the value that evidence-based investing brings to your long-term perspective. By applying a scientific approach across a global investment strategy, you can develop a deeper and broader understanding to see you through the tough times. Liew explains: “A good investor, through that research and understanding, can develop the conviction to stick with a strategy through short-term tough periods, whereas a bad investor who doesn’t have that understanding really can only react to what they see, which is short-term performance.
Since there’s no way to tell for sure what the future has in store, even disciplined investors are left questioning whether a downturn represents a challenging period to be soldiered through, or an unwelcome change of course. In the shadow of uncertainty, research and understanding are as close as we’ve got to an enlightened approach to guide the way.
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