Share this article: Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

Short-termism is an actual word (I think), just google it.  According to the Financial Times, it refers to the excessive focus on short-term results at the expense of long-term interests.  Their definition deals more with the behavior of corporations but short-termism is alive in the world of investment management and creates behavior detrimental to long term results.

Investors tend to look at the results rather than the credibility of those results…and to pile on, the results in focus are typically short term – a bad combination.  Just look at this picture below, the lack of patience exhibited by the industry says a lot about why the behavior gap isn’t going anywhere:

coyotjnviaaohm5

Looking at short term results without an understanding of methodology responsible for the results leads to behavior that crushes your probability for success.  An understanding of what’s happening under the hood goes along way with increasing patience during periods of under-performance, which all strategies will experience.  Rather than spend your time seeking the next best thing, devote more energy to an understanding of what’s already there.  Is there evidence to support what’s in place – do you understand that evidence – do you know when it will look good and when it will look bad? Having an answer to those questions can reduce short-termism and increase long term results.