NEW YORK (Real Money) -- Two questions define this moment: "What should I buy?" and "Have I missed the rally?"
It's up to the individual to answer these questions, but you have to try to develop some consistency and some discipline.
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I learned this the hard way. Many a time when I ran a hedge fund I would miss a 4% rally like we just had. The tendency, though, is never to say "I missed it," and instead is to just say, "What should we buy?"
That's why you need a disciplinarian in the room. Or you have to develop discipline yourself. For me, I was lucky enough to have Karen Cramer in the room, a tough-as-nails trader who spoke truth and didn't mind how upsetting it was.
We would review our portfolio every couple of hours back then and the meetings were really intense. Brutal. But we were successful, over 14 years tripling the market's performance after all fees. So, you have to presume we did many things right and one of them is endlessly reviewing to test conviction and check information and deciding whether opportunities had come and gone.
So, I am going to let you be a fly on the wall in one of these meetings.
On a day like Friday, I would come in to our morning meeting, held before the market opened, and say, "Is it time to buy?" She would look at me with scorn and say, "Time to buy? You are kidding. The time to buy was Tuesday when everyone hated the market."
I would then say, "But we didn't." And she would say, "Well, we were stupid, we got it wrong and now we must be patient and wait for something to come in."
"Wait," I would say. "What if it doesn't come in? What do we do?"
She would respond: "Nothing, because we missed it and we have to own up to that and pay the price."