Thinking Long Term


One of the most important aspects of investment success is an alignment of thought and decision making with the relevant time horizon. That is, if we want attractive results five years from now, we should be making decisions today that are most likely to generate those attractive results in five years, given the current circumstances.

We can’t focus 99% of our time on what we think will happen over the next six months and hope that it all works out after five years. This is a recipe for disaster. Yet it is a disaster that plays out over and over again, with increasing frequency, in our 24 hour a day media system in which market pundits seem convinced that buried treasure lie in predicting what the market will do over the next six months. This may make him or her look smart if they turn out to be correct, but it provides little value to any person invested in the market for long term results.

This very temperament is a symptom of being human; and the short term thinking in today’s financial markets is a situation analogous to a healthy diet. Everyone knows the benefits of eating healthy each and every day. That is, you live happier and most likely for longer. Yet it is apparent given our society’s health issues that most of the population doesn’t have the ability to think beyond how delicious that dessert will taste after the already belt busting trip to the buffet. The same is true for most participating in financial markets. The desire for immediate results often sedates rational decision making, jeopardizing the need for long term security and steady returns.

This is a tough pill to swallow, I know. I am a sucker for ice cream myself. But it is essential to understand that investors can only be successful if they make decisions that are aligned with the end goal, outside of a little luck. That is why we remain steadfast in our approach to investment management. While it may not taste as good all the time, this disciplined approach has the highest probability of reaching the end goal. We remain true to this discipline as we believe that the need for long term security should never be traded for the prospect of short term results. That is why we will never purchase securities that are speculative in nature. This is a discipline we think all investors should adapt, as it would make for a more rational world. However, we also believe it is likely that many participating in the financial markets will find the prospect of near term returns irresistible, extrapolating the vagaries of the market.