Fund Outperforms Despite Underperformance

Guy Spier shares his experience managing psychology during a long period of fund underperformance while maintaining long-term outperformance.

"I've underperformed the S&P index for 7 or 8 years now. About a year or two ago, I had to ask myself: in the face of underperformance, what am I going to do? Am I going to say this sucks, this isn't working, I need to change my strategy and risk everything that's dear to me? Or am I going to say - I understand what I'm doing, somehow the market's not rewarding it the way I would like, but I know what I'm doing will, even in the worst possible cases, lead to a really good life even if I am underperforming.

My first investors were friends and family who had never invested in equities before. Even if they're underperforming the S&P, they vastly outperformed what they would have gotten in fixed income and cash instruments. They've won many times over.

I got to have what I like to call 'courage' where I realized that the key is to compound and to make moves that I know will enable me to compound. If I can end up beating an index then that would be great, but I cannot jeopardize compounding for the sake of beating the index. I have to focus on compounding."