In investing, time is your friend

Category: News

One of the great challenges that all investors face is that there is no easy or quick way to
investment success. Aesop’s fable of the tortoise and the hare is a useful metaphor. You have
to use the time on your side – which could be over multiple decades – to capture the returns
of the markets effectively, but often slowly. In the short-term, market returns can be
disappointing. The longer you can hold for, the more likely the returns you receive will be at
worst survivable, and hopefully far more palatable. It is time that allows small returns to
compound into large differences in outcome for the patient investor. The reality is that markets
go up and down with regular monotony.

The stock market is a device for transferring money from the impatient to the patient.
Warren Buffett

If you want to be a good investor, you have to be patient. On your investing journey, you will
spend a lot of time going backwards, recovering from the set back and then surging forward
again, often in short, sharp bursts of upward market movement. You just have to stick with it.
Remember that you have to be in the markets to capture their returns. Impatient investors
tend to lose faith in their investments too quickly, often with painful consequences.
There are no certainties in investing, but investors can give themselves the best chance of
achieving their expectations by allowing the passage of time to let short term uncertainty be
overwhelmed by long term expected outcomes.

In the short run, the market is a voting machine but in the long run, it is a weighing machine.
Benjamin Graham

The figure below is a powerful graphic demonstrating the benefit of convergence towards
stock market expectations enjoyed by investors who befriend time.

Risk warnings

This article is distributed for educational purposes only and should not be considered
investment advice or an offer of any security for sale. This article contains the opinions of the
author but not necessarily the Firm and does not represent a recommendation of any
particular security, strategy, or investment product. Reference to specific products is made
only to help make educational points and does not constitute any form or recommendation or
advice. Information contained herein has been obtained from sources believed to be reliable
but is not guaranteed.

Past performance is not indicative of future results and no representation is made that the
stated results will be replicated.

Gem & Co Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA).
Investment values fluctuate and can go down as well as up (including any income generated from them); you may not get your initial capital back. Past performance is not a reliable indicator of future returns.

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