Long-Term Investing in an Impatient World
Last Sunday, an Anderson Cooper “60 Minutes” segment profiled smartphone addiction and Americans’ increasing dependence on their mobile devices. The idea that society is too connected to their smartphones certainly isn’t a novel concept but some of the findings explored in the piece are downright disturbing.
It’s an understatement to suggest that in 2017 we live in an impatient world that’s developed a growing need for instant-gratification. Over the past decade, the Internet, smartphones and other technology have completely transformed how we interact with each other and consume various goods and services. This shift can be highlighted across any number of fronts in our daily lives:
We shop differently. When we see something we like, we go onto Amazon and it arrives at our house within 2 days.
Watching a movie? Forget Blockbuster or the video rental store, we immediately download ANY MOVIE of our choice and watch it instantaneously on our TV, tablet, laptop or mobile device.
We certainly don’t tolerate commercials or network broadcast schedules while watching TV anymore. Our shows are recorded or viewed on Netflix and consumed at our own time and leisure. Most people can’t even stand to watch a show’s season over the course of its normal schedule (which can last months) and instead choose to wait until a time they can simply “binge watch” the show in a matter of days.
Rather than focusing on our daily lives and consuming our news via the morning newspaper or evening newscast, we are constantly fed real-time “news” 24/7 and feel uninformed if a few hours go by without some type of update.
Twitter provides a window into everyone’s instant thoughts or observations. Instagram provides an immediate window into everyone’s current whereabouts or lunch menu. Facebook provides a window directly into everyone’s entire life story.
When we text, email or message someone and don’t receive an immediate response we grow anxious and irritated.
If our phones or Internet delay for even just a few seconds, our blood boils with frustration.
The list goes far beyond these simple examples but all illustrate society’s complete lack of patience in our daily lives.
We’ve all been told that “patience is a virtue” when expressing frustration over a longer-than-expected delay. It’s a phrase that rings true in many areas of life, particularly as it relates to investing. Since we expect such instant results in so many areas of our lives, we’ve developed that same expectation with investing.
I just started investing this year, why haven’t I seen any results!?
The problem is that unlike shopping, movies, television and social interaction, there is no technology that can accelerate the benefits of long-term investing into some form of instant gratification. Sure, we can all take our shots at day-trading or trying to identify the penny stock that will turn us into a millionaire overnight, but history and evidence will suggest these are incredibly low-percentage investment strategies. Historical data and decades of analysis are consistent in their findings that the most successful investors are those that adopt a long-term approach and patiently execute a strategy over a long period of time – in fact, a very long period of time. Not weeks, not months, not years. Decades worth of time.
In a world where 12 months can sometimes feel like an eternity, it’s difficult to shift gears and adopt this long-term mentality when it comes to saving and investing. Further complicating the process is the role technology now plays in the financial services industry. In addition to the hordes of unsolicited daily advice investors have heaped upon them by the media, bloggers and financial service firms, we now have real-time access to our portfolios through the convenience of smart phone applications. It’s hard for investors to remain patient over the long-term when they can check the balance of their investment accounts multiple times throughout day. It’s hard for investors to maintain a consistent investment philosophy when they can read an investing article on their smartphone and subsequently make trades in their portfolio from that same device all while riding the train to work.
Vanguard’s Jack Bogle, a pioneer in the investing industry, once said, “My advice to investors is just to throw their 401(k) statements into the wastebasket. Don’t peek. Open the envelope when you retire and have a cardiologist standing by, because you’re going to be totally amazed.”
His point is that the power of time and compounding interest in long-term investing is amazing but can only be achieved through patience and discipline. Impatience in executing a long-term strategy leads to inefficient performance-chasing and other bad investment decisions. Investing is always going to remain an area where our impulse for instant gratification needs to be ignored.
Through technology, we can now watch all six seasons of our favorite TV show over the course of a week. We can watch the entire season of House of Cards the very night it is released on Netflix. Unfortunately, no technology is ever going to come around that compresses 40 years of investment returns into a single 12-month period. To achieve that result, it simply requires time, execution and patience. It’s not an easy process, but the long-term results are incredibly rewarding.