Title: How To Mentally Handle Tough Times — When in doubt, zoom out Show: Compounding Quality (Substack, compoundingquality.net) Guest: Pieter Slegers (author) / Team Compounding Quality Date: 2026-03-31 URL: https://www.compoundingquality.net/p/how-to-mentally-handle-tough-times Length: written post (paid) — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; page chrome (like/share counts, CTAs) removed. Quoted images (the Partner's question, Bill Ackman's tweet, the Baron Capital momentum-versus-quality chart, the Buffett annual-return table, the 1999 headlines, the three Fiscal.ai forward-PE charts, the quality-is-not-all-equal card, and the portfolio fundamentals / Owner's Earnings / Free Cash Flow charts) are not reproduced here. One passage in the original is duplicated almost verbatim ("We see the same pattern happen over and over…"), and is transcribed as published. =====
Hi Partner
Recently, a Partner asked a very interesting question. [quoted image]
Doing the right thing during tough things is one of the most important things for successful investors.
Let's share the framework we use, and how you can apply it too.
Are times tough?
If you feel bad about underperforming the market since the beginning of the year, please note the following:
Chris Hohn is down 11%
Bill Ackman is down 19%
Dev Kantasaria is down 20%
Chuck Akre is down 21%
Bill Ackman even tweeted this. [quoted image]
His advice? Invest in quality stocks!
Time after time the same thing happens.
Every time stocks fall for a little while, investors give up on them.
They switch to investing in ETFs.
This always happens when individual stocks are trading at very attractive valuation levels.
Then when everything goes back up, investors switch their focus again to individual stocks.
It goes without saying that you should do exactly the opposite.
Great investors don't optimize for performance over short time periods. They optimize their portfolios for long-term outperformance.
We see the same pattern happen over and over.
When stocks drop, investors panic and move into ETFs.
This usually happens when individual stocks are at their cheapest and most attractive.
Then when the market recovers, they pile back into individual stocks at higher prices.
You should do exactly the opposite.
Great investors don't optimize for performance over short time periods. They optimize their portfolios for long-term outperformance.
Times in the stock market are strange. Very strange.
And I think we're seeing more and more proof that we're in a bubble.
What usually happens at the peak of a bubble?
Momentum and high-beta stocks massively outperform the market while quality stocks underperform by a significant degree.
A recent update from Baron Capital showed this exact pattern. [chart image]
This is dangerous. Very dangerous.
Warren Buffett is the best investor in the world.
He compounded by almost 20% (!) per year since 1962.
If you invested $10.000 in 1962, here's what you'd have today:
S&P 500: $6 million
Berkshire Hathaway: $3.6 billion
This means you could take away 99% (!) of Buffett's returns and he would still have outperformed the market.
But now look at 1999 in the chart below.
In 1999, Berkshire Hathaway was down 19.9% while the S&P 500 increased by 21%.
That year, Warren Buffett lagged the index by 40% (!).
Headlines like this started popping up in 1999. [image]
We all know what happened just after 1999: the burst of the Dot-com bubble.
I don't want to make you afraid or very negative about the market right now. But I do think it's important to understand where we are today.
This allows you to do the rational thing.
The good news?
Quality outperforms in the long term.
While the market is trading at very rich valuation levels, some companies are trading at one of their lowest valuation levels ever.
Here are the Forward PEs of some companies…
Constellation Software. [chart image]
Source: Fiscal.ai
Brown & Brown. [chart image]
Source: Fiscal.ai
Fair Isaac. [chart image]
Source: Fiscal.ai
How To Mentally Handle Tough Times
Here are 5 tips you could use to mentally handle tough times:
Don't look at stock prices daily
Discomfort is part of the game
Pick a strategy that suits you
Focus on what you can control
Zoom out
1. Don't look at stock prices daily
Something that helped me tremendously during my investment journey?
During tough as well as good times, I blur the statistics of my portfolio in my broker.
This means that when you login into your broker:
You can't see how much your portfolio is worth
You can't see how much profit/loss you made today
It helps to zoom out and focus on the long term.
Many people say at the end of their career their own house was the best investment of their life.
That's great!
But how many people wonder each year how much the value of their house went up or down?
I doubt very many.
You should think exactly the same about your stocks.
Another example is my parent's brokerage account.
I've managed some money for them since 2017.
We started with a small amount and my parents said the money would be used as a wedding gift for my brother and me.
They haven't logged into the account since 2017.
And I can tell you that the amount that currently sits in that brokerage account is probably 3x higher than what my parents think it is.
That's the true power of zooming out.
By the way… If they still want to give it as a wedding gift, I should get married as soon as possible.
2. Discomfort is part of the game
If you do the same as everyone else, you'll get the same result as everyone else.
Tough periods aren't exceptions. They're the price you pay for long-term gains.
You should expect them as an investor instead of resisting them.
The rule of three from Francois Rochon is very powerful:
One year out of three, the stock market will go down at least 10%
One stock out of three that we buy will be a disappointment
One year out of three, we will underperform the index
If you can't stand the heat, you should stay out of the kitchen.
3. Pick a strategy that suits you
Investing is simple, but not easy.
To win in the stock market, there are two very important things:
Pick a strategy that suits you
Pick a strategy that has proven to work
Why you should pick a strategy that suits you?
Because you can copy someone's stock idea, but you can never copy someone's conviction.
You need to truly believe in the strategy yourself.
This will help you to persevere when things get tough (and they will from time to time).
Picking a strategy that suits you is important, but it's not enough. It also needs a proven track record of outperforming in the long run.
Quality is definitely one of those strategies.
It's also important to highlight that not all quality is created equal. [image]
4. Focus on what you control
In the short term, the market is a voting machine. In the long term, it's a weighing machine.
This means that in the short term the market is (almost purely) driven on sentiment. In the long term, stock prices follow their intrinsic value.
As an investor you should focus on what you can control.
You can't control the sentiment of the market (Mr. Market is a manic-depressive).
But you can do the following:
Buy wonderful companies
Led by amazing managers with skin in the game
Trading at fair valuation levels
That's why relentlessly tracking the fundamentals of the companies you own is so important.
You don't care too much about the stock price performance. But you do care about how the intrinsic value of your companies evolve.
You look at three things:
The fundamentals of your Portfolio versus the index
The evolution of the Owner's Earnings (EPS Growth + Dividend Yield)
The Free Cash Flow the Portfolio generates for you
4.1. Fundamentals of your portfolio
Here's what the fundamentals of our portfolio look like. [image]
4.2. Evolution Owner's Earnings
The evolution of the Owner's Earnings looks as follows. [image]
4.3. Free Cash Flow
Finally, the evolution of the Free Cash Flow. [image]
5. Zoom out
When in doubt, zoom out.
History doesn't repeat itself, but it often rhymes.
What's happening today is not unique. It has happened before.
One of the most powerful concepts in finance? Reversion to the mean.
Extreme performance… whether unusually good or bad… tends to drift back toward average over time.
After rains comes sunshine. Always. After every bear market comes a great bull market.
Just keep this quote from Warren Buffett in mind. [image]
The conclusion from this? When in doubt, zoom out.
Conclusion
Here are the key takeaways from today's article:
Periods of underperformance are normal. Even for the best investors in the world. It's the cost of using a long-term winning strategy.
We may be in some kind of bubble. Quality stocks are underperforming at historically extreme levels while speculative stocks are surging
5 Tips to handle tough times:
Don't look at stock price daily
Discomfort is part of the game
Pick a strategy that suits you
Focus on what you can control
Zoom out
Everything in life compounds Team Compounding Quality
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data