In his must-read, best-selling title, One Up on Wall Street, famed investor Peter Lynch says: "Long-term investing has become so popular, it's easier to admit you're a crack addict than to admit you're a short term-investor." Just ask a fellow investor and see what he or she says.
However, despite our best attempts and suggestions to do otherwise, so many of us will relapse more often than we'll care to admit. One day we'll become worried about the market's gyrations or the media's next "crisis" and what it all means to our portfolios. The long-term strategy will go out the window. I've done it myself, more than I'd care to remember.
For a sobering reminder of how rewarding it is to invest long term, I look at the most successful investors of our time. The Buffetts, Mungers, Lynchs … the list goes on.
If an average investor can take any one piece of advice or quote from these legends, for me, it'd have to be Warren Buffett's, "The best holding period is forever." That's because so many of us can leverage success by following this simple, unambiguous, philosophy.
Successful buy and hold investing does not require complex arithmetic nor a shiny office with a team of 100 analysts. It's about controlling our emotions. Sounds easy right?
Not so fast. Being able to remain calm under pressure is not as easy as you may think.
You see, people control their investing spontaneity in a variety of different ways. Some use mantras, distractions or social support networks. But frankly, the best way is, quite simply, to switch off and do nothing. We all say we'll do it, but many of us won't.
It necessitates self-assuredness on our behalf and we, as investors, can struggle to remain confident in our analysis and execution when the market, seemingly unjustifiably, writes-off 30% (or more) from our nest egg. In the future there will be many more times when the fear of the unknown drives us towards failure, when the diligent long-term investor prospers.
By way of example, take the 10-year performance of Commonwealth Bank of Australia (ASX: CBA), Woolworths Limited (ASX: WOW), BHP Billiton Limited (ASX: BHP) and, more broadly, the S&P/ASX 200 (ASX: XJO) (INDX: ^AXJO). Despite war in Iraq and Afghanistan, the GFC, Cyrus, and countless other crises, all three companies have returned in excess of 200% gains to their faithful long-term shareholders. The index is up 55%.
Another 10 years – Make $1 million on the ASX
Here at the Motley Fool Australia, we champion long-term investing strategies because they've rewarded us EXTREMELY well. Now, we want to share our successful strategies with as many people as we can.
