You can say many things about former hedge fund manager Stanley Druckenmiller, including that he is a billionaire, investor, and philanthropist. Druckenmiller has a long history of market success, and with an estimated net worth of around $6.9 billion, he’s clearly done something right.

The former money manager for George Soros’ Quantum Fund Druckenmiller considers himself a top-down investor like Soros. He is known to hold long and short stocks and use leverage to trade futures and currencies. However, what’s most notable are his market views, words that every hopeful investor should listen to carefully.

The Quote

One of Stanley Druckenmiller’s more famous quotes relates to how too many investors don’t look toward the future: “The biggest mistake investors make is they invest in the present rather than forward looking and looking at where the puck is going instead of where the puck is.” 

The quote carries on slightly longer, with Druckenmiller indicating that investors should be looking out 18-24 months with their investment strategies. Of course, the best thing you can do is break this quote up and look at how investors can apply it to their daily market lives. 

The Biggest Mistake

If you break this quote up and start by looking at the first part, “The biggest mistake investors make is they invest in the present…” it highlights a common pitfall many people make. Too many investors get caught up in whatever immediate things they hear on CNBC or other investors on social media. 

As a result, these individuals get caught up in the idea that because a stock is doing well, it will continue to do well, and this isn’t the reality. If a company isn’t doing well, they panic sell, creating an environment where short-term thinking and emotion overrules every other strategy. 

Forward-Looking

When you think about this part of the quote, “rather than forward-looking…” it comes off as the core of the Druckenmiller message. The most successful investors know how to anticipate future market trends, identify opportunities, and understand where the market is going, not just where it is today. The bottom line is that these successful investors have a vision and know how to act. 

Follow The Puck

The last part of the quote takes a page out of the hockey playback as Druckenmiller indicates, “…and look at where the puck is going instead of where the puck is.” 

In this hockey analogy, you get to the crux of the strategy, as hockey players have to anticipate where the puck will be, not just where it is at that very moment. In the same way, successful investors know they can’t just focus on current or past performance, they have to focus on future growth potential. 

How Investors Should Apply This Quote

One of the biggest notions in this quote repeats what we’ve already mentioned in that reacting to current events is a bad strategy. You must consider the long-term implications of current trends, including macroeconomic conditions that may apply to specific stocks. 

Perhaps the most important takeaway for any investor to succeed is that you can’t and shouldn’t invest without proper research. Your stock strategy can’t be based on picking stocks because you like its ticker name. Instead, it has to focus on sustainable companies, have strong management, and can survive and thrive in competitive landscapes. 

Of course, patience is a virtue of all successful investors. If you are trying to look toward the future, as Druckenmiller suggests, you can’t expect quick payoffs with your investments. You must think long-term, which is the biggest part of any successful investor’s strategy. 

Last but not least, make sure you remain diversified in the market. There is no such thing as a guarantee. No matter how forward-looking you are trying to be or how much research you have done, you have to hedge your bets and ensure you are diversified enough to outlast any downturns in the market. 

 

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