It’s been almost ten years since the market topped out in 2007, prior to crashing nearly 58%. If you bought the S&P 500 on the exact day the market peaked and held on, ten years later, you would have doubled your money earning just over 7% a year. So much for market timing.
Active managers would deliver far greater value to investors and to the wider economy if they were, well, rather less active. The evidence is categorical: the less you trade, the better you perform. It’s mostly down to costs. Quite simply, buying and selling incurs fees and charges that erode their net returns. There are very few managers who actually add value over any meaningful period of time, and the one thing that almost all of them have in common, is that they rarely trade. They buy and hold. As an example, the VOYA Corporate Leaders Trust Fund hasn’t bought a single stock for more than 80 years, and has outperformed all but approximately 2% of its competitors.
Investing is a long-term process. Trying to make a quick buck in the market is possible, but it’s hard work and difficult to achieve over and over again. Having a long-term outlook is critical to successful investing.
Seth Klarman, a brilliant long-term investor, put it best, and I quote “We are always long-term oriented. We never attempt to gage near term market movements; we have no edge there. We strive to make long term investments that have compelling long term risk-reward characteristics. We are never afraid to stand apart from the crowd. We stick to our game plan and focus on areas where we are skilled and experienced. We are resolute in resisting the short-term performance pressures and herd behaviours that plague the investment process.”