It’s good to be right

Tim Mak

Investment is a rare field where “being right” will help you. Unlike in other worldly endeavors it’s a necessary condition for success in investment.

Unless, of course, someone’s talking about investing for the short term. But then this shouldn’t be called “investing” at all, but rather, “speculating.”

In politics, if you’re running for public office, the winner is the one with the most votes. The one who is “right” on things for the long term may not have the luxury of waiting for the truth to emerge. He or she may have lost the election in the meantime.

By “being right” I don’t mean to imply economic religious conservatism. I’m talking about being right on observing the world, seeing things as they are and predicting how things will pan out.

Say you think Measure A is going to help our country solve Problem X. Assume that it’s true, and in the long run, A is the best for the country. Another politician proposes Measure B, a lousy decision in the long run, but one that provides temporary high for the economy. The second politician will bury the first. People love quick fixes and want fast results. They generally don’t want to think far into the future.

In politics, seeing far into the future doesn’t help win elections. Voters can’t wait that long, they need to vote today.

But in investments, seeing things right is necessary for success. You can fool the people at the polls, but you can’t fool the market in the world. True, in the short term, stock markets may be governed by emotions, but over the long term, they are governed by economic fundamentals.

If a company perennially loses money, no amount of optimism can sustain it for decades. Similarly, if great companies continue to make tons of money, no amount of pessimism will suppress their stock prices forever.

In the end, those who are right about things will profit handsomely in investments.

Tim Mak is a teaching fellow at the College of Business Administration and a columnist for the Summer Kent Stater. Contact him at [email protected].