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I'm writing this from a hotel room in Maryland, USA, where The Motley Fool is holding its annual company conference known as Foolapalooza.
(Don't worry – we're also keeping a close eye on the market and the companies we've recommended to our members, while we're here, and a few of our team remain at home, minding the fort, and making sure we don't miss anything!)
I have to be quick — it's the lunch break, and I'm expected back in a minute.
What you might know about The Motley Fool is that two brothers, David and Tom Gardner are our co-chairmen and co-founders. What you may not know is that we have a third co-founder, Erik Rydholm, who went on to be a stunningly successful sports television producer.
At the conference earlier today, all three men were up on stage, telling stories from The Motley Fool's history. Not only are they great stories, but our company has grown a lot in the past few years, and it's important that new recruits are grounded in that history.
But why am I telling you all this?
Because, at the end of their time on stage, the session's host asked them to reflect on advice they'd give their younger selves. All three men's responses were excellent, but I wanted to share Erik's in particular.
His advice was captured in three words: 'Be directionally correct'.
I think it is wonderful life advice. It's great career advice. And it's terrific advice for investors.
I'll let you draw your own conclusions on the first two, but I do want to amplify how I think the latter point applies for us.
See, a lot of investors are (understandably) obsessed with not making mistakes. With trying to make sure they're right, every single time.
Don't get me wrong: those are worthy aims. And, if I could take out my failures, without penalty, I would.
But of course, as Yogi Berra once said, 'predictions are hard… especially about the future'.
Now, contrast that with being 'directionally correct'.
What I took from Erik's words – and this is my interpretation, not his – is that if you do most of the right things, as often as you can, then you'll end up in roughly the right place.
Now, if that sounds like I'm hedging, I'm not. But if that sounds like I'm allowing for the reality of imperfect uncertainty, then you're 'picking up what I'm laying down' (as the kids almost certainly don't say any more).
You can't expect to be right with every single investment. Or, if you are, that probably means you're only holding cash and you're in a constant fight with inflation just to keep your purchasing power roughly equal. That can make being 'right' a very expensive exercise!
But if you regularly do the things that are most likely to correlate with success, over time, then you're probably 'directionally correct'.
Not 'perfectly accurate'. Not 'guaranteed not to lose'. And not 'sure to avoid volatility'.
But 'directionally correct'.
That is, you're doing the right things, and heading the right way… toward a ballpark result that, if you stick with the process, is likely to be the one you seek and deserve.
For investors, I reckon that's buying quality companies.
It's looking for businesses with bright futures.
It's paying a good price.
It's being diversified.
It's not using borrowed money.
It's not speculating, or making silly bets.
It's adding money regularly.
It's not sweating the small stuff, or the short-term.
It's playing the long game. (Which, coincidentally but not surprisingly, was David Gardner's advice to his younger self!).
I reckon if you invest accordingly, you stand a very, very good chance of being very, very happy with the outcome.
Now, you do have to stick with it.
You can't just pay it lip service, then diverge from the path.
But if you can embrace it, and see it through, then I think you'll find out that being 'directionally correct' is a great way to think about – and implement – your investment strategy.
Now, if you'll excuse me, it's time to head back to the conference!
Fool on!
