There is almost no exception to this rule, the nearest - inevitably - being the legendary Warren Buffett, America's most successful stock market investor. This week, from his redoubt in Omaha, Nebraska, he unveiled the latest results of Berkshire Hathaway, the company through which he channels all his investments.
Having achieved a return of 43.1 per cent in 1995, last year his gain was a more modest, but still remarkable, 31.8 per cent. Granted, there has been the mother and father of a bull market on Wall Street in the past two years, but Mr Buffett has once again managed to outpace even the US market's heady performance by 14 per cent over the two-year period.
This is something that he has managed to do in all but three of the past 30 years, a record that defies all logic and experience. More remarkable still, he has never once had a down year in those 30 years.
So big has Berkshire Hathaway become on the strength of his investment prowess that last year's gain translated into a $6.2bn increase in net worth. The man himself, the nearest thing to a genius that the financial markets have ever seen, continues to play it all down with customary panache. In 1995, he coolly observed that "any fool" could have made money on Wall Street, and quoted the aphorism: "a rising tide raises all yachts".
This year, he has added his voice to that of others who have warned that the US market looks overvalued at current levels. But his policy of sitting tight on his investments, which include large holdings in Coca- Cola, Walt Disney and Gillette, continued to pay rich dividends last year.
His comment: "We continue to make more money while snoring than when active." For the moment, he continues to make the art of stock market investment look ridiculously effortless.
Back in the real world inhabited by almost everyone else, many professional investors are finding the going much tougher, at least in the sense of trying to outperform the market. Last year was notable for the number of well-known UK fund managers who found their traditional approach unsuited to the peculiar market conditions that prevailed. None struggled more than Foreign & Colonial, the largest general investment trust in the UK, which has around 100,000 investors, nearly half of them in its low-cost savings schemes.
The trust did not have a disastrous year, but its performance was pedestrian - an increase of just 4.8 per cent, in a year when the UK market was up 11.7 per cent. Its holdings in high-yielding stocks, a group that many wrongly expected to do well last year, dragged down its UK performance, but the real damage was done by the volatility of currencies. Failing to hedge its overseas holdings against the strength of the pound in the second half of the year undid nearly all the successes it had in picking markets and individual stocks.
Just as importantly, Foreign & Colonial suffered from the general widening of discounts in the sector. The effect was that, despite the modest gain in asset value, the shares actually fell over the year. Foreign & Colonial has been trading at a discount for much of the past year of 10-15 per cent, a level that it has not experienced for something like five years.
A lousy sector and a relatively poor performance within the sector has not made for the best of leaving presents for Foreign & Colonial's long- serving manager, Michael Hart. It is now 28 years since he took over the reins of the trust, and it is no exaggeration to say that there is no more widely admired investment manager in the City. Mr Hart hands over the management of the trust to his colleague Jeremy Tigue, in July, before retiring from the company at the end of the year.
Despite the disappointing recent performance, Mr Tigue has a hard act to follow. Since Foreign & Colonial's whole purpose is to provide a well- diversified, international portfolio with an income stream as well as capital growth, the scope for pyrotechnic performance is always going to be limited. Sure and steady, rather than fast and furious, has been its style for more than a century, and there is no logical reason for changing it now.
Mr Hart's personal approach has been to seek to add an edge in performance by having the courage to buy into failing markets, taking positions on currencies and juggling at the margin with the amount of gearing in the trust. The formula has worked well for most of the years he has been in charge, and his successor intends to adopt a broadly similar approach. Chopping and changing an investment style just because of one year's indifferent performance would smack of panic.
That said, the outlook for the investment trust sector remains mixed. There are still too many trusts around, and the competitive pressures are intensifying. The Foreign & Colonial that Mr Hart joined over 40 years ago is barely recognisable in today's very different operation.
At the same time, there is no question that active fund management is getting harder every year, as the relentless rise of indexed funds suggests. Anyone whose job is to invest across all the main markets of the world, as Foreign & Colonial does, faces a tough job. There are simply so many variables to be got right. In a year when currencies are volatile, like last year, the scope for error rises. The odds are that the shares will come back in due course - and the discount certainly makes them look attractive on a medium-term view.
One reason why Mr Buffett has done so well for so many years is that he keeps what he does as simple as possible - just a few large holdings of shares, which he watches like a hawk. In over 40 years of investing, he has only once taken a big position outside the United States - that was in Guinness, the drinks company, which he has subsequently sold. So currency movements have never been something he has had to worry about. There must be times that Foreign & Colonial would wish to have made their life as simple.Reuse content