34 | Patient Investing, Part 6 of 7: How Long is "Long"?
Investing in a manner that you believe in and in which you have a baseline understanding knowing that, regardless of strategy or plan, the only guarantees are that someone will always outperform you and that how you behave during the inevitable unsettling times will be the biggest determining factor in your lifetime returns. Owning businesses tends to increase potential returns, diversification tends to make the ride smoother, long horizons tend to increase the probability of positive returns, and above-average patience is a superpower.
What do you think the market is going to do this year?
What a question...
It's hard for folks not to ask and it's impossible to answer.
I literally have no idea what the market is going to do this year.
The same will be true if I'm asked again next year, or in 5 years, or in 10 years, or in 20 years.
I'll go as far as to say that someone constructing an answer to the question, "What do you think the market is going to do this year?" is taking the easy way out and only further ingraining our unhealthy desire to grasp for certainty.
If I'm forced to give an answer, I'd probably point to the left hand side of the JP Morgan chart below and say if we're 100% invested in stocks then I'd bet this year will be somewhere between -39% and +47%.
Obviously, that's not super helpful.
I think we're asking the wrong question though.
The question should never be, "What do we think the market is going to do this year?"
The question should be, "Why do we have dollars invested if we think we'll need them next year?"
Investing is not a slot machine, but the shorter the horizon, the more it's going to feel like a slot machine.
Ask me how I think the market (i.e. the collection of companies that make up the market) are going to perform over the next 10 or 20 years and now we're talking about something worthwhile.
If our outlook for investing is a single year, at some point there are going to be some pretty disappointing results - hopefully (cross your fingers!) those results don’t correspond with a significant life event.
If our outlook for investing is a couple of decades, I don't think we'll ever be disappointed by the results regardless of whether they are the historical best or historical worst for a 20 year period.
The tricky part is that for more than a couple of decades, we've been building habits of daily life and engaging with technology in ways that have made the next moment seem like the only moment that matters...
Additional Reading
Keep It Going by Morgan Housel
The delay by Seth Godin
Days or decades: What’s it going to be? by Carl Richards
Stocks For the Long Run by Ben Carlson