Every now and then I stumble upon a letter from an investment advisor/hedge fund that I enjoy reading and decide to share with readers. This letter below, from Downtown Associates has some great words of wisdom. My favorite:
We will not “chase” performance – when stocks are expensive the ensuing returns are likely to be subpar. Instead we prefer to hold cash, remain liquid and wait for attractive opportunities. Why should today’s opportunity set be the only one we consider when tomorrow’s is likely to be more fertile? By remaining disciplined in our purchase decisions, we seek to maximize future returns while limiting our downside risk (the possibility of a permanent loss of investment capital).We prefer the risk of lost opportunity to the risk of lost capital.