Investing Tip #6: Give It Time

Watching my children play makes me dizzy.  The oldest finds a toy and begins to play with it.  As soon as this happens, the other two girls swoop down on her as if it’s the only toy in the world.  After five minutes (if that) Makayla puts the toy down and moves on to another one.  At which time the whole process begins all over again.     

Long attention spans and children usually don’t go together.  But when you really think about it, we adults don’t have much longer attention spans either.  After listening to a boring speaker for a half hour, we start fidgeting, glancing at our watches, and begin thinking about a million other things. 

When it comes to investing, our attention spans are fairly short as well.  All of us love it when we invest in something, and the very next day it takes off.  Unfortunately, that doesn’t happen very often.  Instead, it takes months and often years for a certain investment strategy to pay off. 

But, many times, we don’t give it enough time.  When one investment disappoints, we ditch it and try something else that seems to be doing something. 

Using a process of elimination works well with a lot of different things in life; if one prescription isn’t working, we try something else until we find something that does.  

But when it comes to investing, it doesn’t.  Often, it’s just the opposite.  Something that has worked for the past three years in a row stops working this year.  And something that hasn’t been working, starts.

For example, bonds had a horrible year last year.  Long-term Treasuries went down 14 percent.  This year, they are up 20 percent. 

It’s important to give your investment process time to work.   

It would be very unrealistic for Penn State (or any team) to hire a football coach and expect him to get them to the National Championship in one season.  He needs time to build his program. 

Likewise, there is simply no way of knowing what millions of investors are going to do on any given day. 

Successful investing requires patience.  If you have good strategy, over the long-term it should do well.  In the short-term, it’s much less certain.