Do not sell based on short-term underperformance
The host argued that selling an investment solely because of recent poor performance is a mistake, as even long-term winning funds and stocks experience deep, multi-year drawdowns.
The argument
Faber noted that 94% of top-performing active funds from 2000 to 2014 underperformed in at least five of those years. He also highlighted that Amazon suffered multiple 50% drawdowns and a 90% collapse on its path to massive long-term gains.
The thesis, stress-tested
✓ What validates it
- ✓A fund's underlying strategy remains disciplined and unchanged despite temporary benchmark underperformance
▸ Risks discussed
- ▸Sticking with a structurally broken investment or a permanently impaired business model under the guise of patience
Hear it yourself
"But the reality is that just about no active investor would have been able to hold that long, and that's because Amazon suffered a handful of gut wrenching 50 drawdowns over the years, one of which was a 90% plus collapse."
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