How To Navigate The Unknown

Investors simply don’t have the data – or expertise – to traverse the uncertainty of the Covid-19 pandemic and make informed investment decisions. Realising this is the first step to protecting your portfolio.

- Simon Brown

I’ve been re-reading a few of the columns I have written over the years, focusing on those that look at the older (more experienced) long-term investors in order to try and get an idea of how they handle a crisis filled with severe uncertainty. In the process I came across an old quote by Warren Buffett in a 1996 annual letter.

“What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

This piece of advice from Buffett apparently originated from a comment by IBM founder Tom Watson, who said: “I’m no genius. I’m smart in spots – but I stay around those spots.”

All of this got me thinking about how long-term investors should manage our portfolios during this incredibly uncertain time filled with a host of unknowns.