The Gutman Group

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The BAG Fund has little to no interest in the daily goings-on in the markets. Nor does it care about what happens a week or even a month from now. We only care about long-term results, the short-term pays us little interest.

“Why?” You may ask. “Because the average investor is ignorant, irrational, emotional and in complete denial about these irrefutable facts.” We answer. In fact, emotional investors are the lowliest scum of the earth, only second to slow-moving pedestrians.

Now you are probably sitting there and wondering why this horribly arrogant person is badmouthing hundreds of thousands of people. What makes this guy so much better than them!?

Well, I am arrogant, not going to argue there; but that doesn’t mean I’m not better than the average investor. In fact, I am infinitely better than the average investor. And I want to make you infinitely better than the average investor! (Compare The BAG Fund’s returns to the markets’ and you will probably see what I mean.)

I am tired of seeing people invest into a stock for the sole reason that it is going up and then sell when it is going down. I am tired of seeing people jump for joy when the Dow rises 43 points and then start stockpiling food reserves when it goes down 12 points the next day. I am tired of seeing the markets rise by a higher level when the weather is nice outside and plummet when the weather is unpleasant. And most of all, I am tired of seeing investors losing their money and then coming to ask me why they are losing so much money.

Then I figured, the world isn’t going to change by itself. As a very wise, very skinny, very funny-sounding man once said, “You must be the change that you see in the world.” For the first few years in my life I honestly thought that people were discussing a type of cuisine when they referred to this man, only later did I realize that they were speaking about the legendary Gandhi.  And thus, this site was created.

Anyway, as I was saying, we invest only with the long-term in mind. If possible, we would hold on to a great company forever. Great companies constantly reinvent themselves and keep making mountains of money for their shareholders. I like great companies. Sadly, great companies don’t always stay great forever, that’s why when something happens to a great company to make it not so great anymore, we get out of there quicker than a teenage boy sneaking around in the girls changing room.

We believe that a good long-term holding period can last anywhere between five and ten years, if not more. It may seem like a long time to hold on to something, but then again when you see your investment grow twenty times larger I doubt you will be complaining. We consider a short-term holding period to be anything under a year.

So, what do we have against the short-term? As I was saying earlier, the average investor is an ignoramus who invests using his or her emotions instead of logic. That’s why you constantly see stocks of great companies fall thirty percent in one day because they missed the analysts’ estimations by a penny (literally) or a stock that is currently struggling to stay out of bankruptcy grow twenty percent in a day because it’s quarterly loss of several billion dollars was a bit lower than anticipated.

In the short-term we are all susceptible to these daily fluctuations (even me, the mighty Mr. Moneybags) caused by investors who overreact to anything and everything and push the markets to unsustainable highs and throw them down into lows that assume the world is about to end (sadly, that’s not even  that great of an exaggeration).

In the long-term, the fluctuations caused by investors’ irrationality are stretched out and ultimately turned irrelevant to create a very simple and exceptionally delightful trend: up.

All you have to remember is this little tidbit of information: One dollar invested in the stock market in 1801 was worth $494,498 in 2009 (Read “Stocks for the Long Run” by Jeremy Siegel). This is despite two hundred plus years of stock market declines, famine, wars, bigger wars, crisis, pandemics, epidemics, depressions, more epidemics, hippies, terrorism, political turmoil and global warming.

By the way that’s at a compounded annual growth rate of 6.5%, imagine if the markets were growing at The BAG Fund level returns… I think my head will explode if I even begin to start thinking about that gargantuan number. It’s also important to remember that the longer you keep your money invested, the more your money will compound and the richer you will be. Read up on the wonders of compounded interest here.

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