If only five investors truly outperform, what about us?
Speaking to CNBC, Seth Klarman reflects on new challenges faced in beating the markets—a feat, says Buffett, surpassed by no more than five investors including Klarman himself.
There are countless considerations put forward by veteran investor Seth Klarman in his interview with CNBC’s Squawk Box earlier this year, all of which should be kept front of mind in our own investing. For one, Klarman is quick to dismiss investing short-termism, which is overwhelmed by his future-facing outlook. “How do I position myself, maintaining somewhat of a longer term perspective,” he asks aloud, before adding, “because trying to trade day-to-day is not a game anybody is really equipped to win.”
“Trying to trade day-to-day is not a game anybody is really equipped to win.”
Instead, Klarman is focused on identifying and measuring company qualities that stand the test of time; elements of a business that have durability and competitive edge. “Investors need to take into account what are the longer-term prospects for a business? What causes a business to be resilient to competitive threats?” These are pervasive questions in Klarman’s rarefied thinking, and he has learned to answer them expertly and apply his knowledge across a 40-year-plus investment time horizon. It’s this rarefied thinking that has enabled him to beat the markets time and again—and to enter into an ever-more exclusive, exalted echelon of investors who have outperformed the market.
“Investors need to take into account what are the longer-term prospects for a business?.”
Certainly, it sounds exciting, but entry is limited. So exclusive, in fact, that Buffett contends Klarman is one of roughly five investors in this exceptional club. Hence why the Omaha investment maestro is a fierce proponent of indexing; investors may well not outperform the market but—unlike the 95 per cent of those who overshoot and underdeliver—they won’t underperform it either.
Watch the complete interview on CNBC’s Squawk Box below or click here.
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