Opinion – Grain in Grain: Find out if you have myopia or hyperopia in investments

Contrary to what general knowledge would say, in investments, those who suffer from myopia tend to miss more opportunities than those who suffer from hyperopia. I explain how investors, acting myopic, can make mistakes in today’s market.

In the dictionary, myopia is defined as a disorder that makes it difficult to see objects that are far away from the observer clearly, but those that are closer are seen clearly.

Those who suffer from farsightedness have difficulty seeing what is close, but have no problem with distant objects.

You already know what I’m talking about, right?

Of course, we can see clearly what has just happened in the market and what is happening now. However, we have difficulty in taking the long-term view. This is usually very blurry.

This disorder causes us to want to make decisions based on what we see and feel right now.

Often, we even justify this attitude with the excuse that we are “acting fast”.

I will explain how many are acting myopic.

Inflation measured by the IPCA has been very low and even negative in recent months. This was one of the reasons that made bonds referenced to the IPCA to perform worse than the CDI.

The graph above shows that in the last three months, the average of public securities referenced to the IPCA, with maturities of less than five years (IMAB5), yielded only 0.24%. While assets referenced to the CDI appreciated 3.21% in the same period.

Driven by the myopic view, investors are attracted to exchange the IMAB5 for the CDI.

However, this effect on the IPCA is short-term. Inflation is low only because of the reduction in ICMS and the drop in fuel prices.

This is a one-off effect.

In the medium term, the IMAB5 appreciates more than the CDI. The chart above shows the difference in return over the last five years. The IMAB5 appreciated 160% of the CDI.

In the long run, the same thing happens. The chart below shows how the IMAB5 outperformed the CDI in the last two decades.

Since 2003, the IMAB5 has yielded 155% of the CDI.

An investment of R$ 100 thousand in IMAB5, in 2006, turned into almost R$ 1 million. While the same investment in the CDI would have resulted in only R$ 675 thousand.

In investments, those who suffer from farsightedness tend to obtain better results than those who are nearsighted.

Thus, having a blurred view of what happens in the short term and looking more clearly at the long term is usually more beneficial for the long-term return of your portfolio.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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