Number one is the intellectual path, chosen by the really smart guys. Not just smart in the way that graduates with a first tend to be smarter than those who laboured to a 2:2. But smart in the sense that they are the ones who see the consequences of a given set of facts before you and I have even spotted that these particular facts are important. Professionals who occupy this niche are the likes of Warren Buffett and John Templeton, said Mr Ellis. "We admire them," he explained, "but usually only in retrospect. At the time of doing their best work we see them as misguided. We do not want to do what they are doing because it looks so unpromising." But that's also likely to be because we struggle to plod through the implications while they can swoop straight onto the conclusion.
Number two is the physical path, and it's the one trodden by most City professionals. Essentially it brings to investment management what Boxer, the stoical work horse, brought to agricultural yields on George Orwell's Animal Farm. "We must work harder," was Boxer's constant exhortation to his fellow farm animals every time the harvest fell short, and it is the rallying cry for the average fund manager. Sure, it demands some mental ability, but most of all it demands stamina: the stamina to do more than your competitors - attend more meetings; read more annual reports; spend more time on your Blackberry; crunch more spreadsheets.
It is not entirely to be viewed with contempt. Even an average hard-working City professional is guaranteed a better end than Boxer's trip to the knacker's yard. Besides, there is some correlation between effort and rewards. At its extreme, consider the rewards that accrued to the hardest working investment analyst ever. That must be Michael Milken, the feted felon of junk bonds whose wealth ran into billions of dollars in the late 1980s. So obsessed was he with trying harder that, when he was learning his trade in the early 1970s, the young Mr Milken bought a miner's lamp and strapped it to the leather aviator's cap that he wore for the daily bus commute into Manhattan. The thing was that the journey took two hours - time enough to do lots of work - but it began at 5:30am, when it was pitch dark in the winter, and Mr Milken needed to keep both hands free. Talk about going the extra mile.
Stick to the plan
Still, if you're not prepared to go to those lengths, there remains the emotional path, says Mr Ellis. "This straightforward, untiring approach is simply to work out the long-term investment policy that is truly right for you and realistic given the history of the capital markets and commit to it, and - here is the emotionally difficult part - hold on."
Too right it's emotionally difficult because the challenge - the real challenge - lies not in holding true to the commitment, but in having confidence that the commitment is built on firm foundations in the first place. Mr Ellis concludes that this approach "suits me fine. It requires no great genius and no great brawn, but it works". That's almost as disingenuous as it's glib.
True, the emotionally-difficult approach was working well in 1988, when Mr Ellis was writing his piece. Back then, returns from almost all equity markets in the developed world for pretty well any investment period of five years or more in the past 30 years had worked a treat. So the easy assumption was that acceptable returns for equity markets were somehow a given. Sure, the markets would have their crises - usually minor, occasionally major - but some immutable force would see them through. So, when the going got tough, all the resilient investor had to do was take a deep breath and affirm his investment principles. Granted, not easy. But no tougher than giving up smoking.
The more accurate conclusion would have been to say that the emotionally-difficult approach "has worked", or even that it is "most likely to work in the future". The trouble is, that's not really the basis for a snappy conclusion.
So, if the intellectual approach is beyond me, if the physical approach is too much like hard work and the emotional approach is based on a flaky assumption, where does this leave me?
Insurance policy
Actually, it leaves me sidestepping matters of emotional breakdown and attending to a practical, yet important, matter. Specifically - and Heaven knows why I had not thought of it before - I am insuring returns on the Bearbull growth and income portfolios by taking short positions in the FTSE All-Share index via contracts for difference. Nothing too drastic - I will insure about half of the funds' exposure to equities. Obviously there is a cost to this. Indeed, it is quite high while the dividend yield on the index is 4.8 per cent, and there is, in effect, a lender's fee to be paid. But, with the UK equity market still looking as if it wants to fall rather than recover, I have to abandon the assumption that these funds are long-only come what may.
