Modern life crowds out patience – First to market…..Squeeze more into your day…..Efficiency is everything…..Instant gratification…..Faster is better! But it’s anathema for sustainably successful investing.
“Time is money” highlights the cost of doing nothing and reinforces belief that rewards are the exclusive domain of active work. This mindset encourages constant activity, making it challenging for investors to appreciate the value of simply holding investments over time. Sitting on your hands and not “doing” by implication is unproductive and not deserving of reward. It is therefore unsurprising that patience stands out as one of the most under-appreciated principles of effective investing and long-term wealth creation. Ironically, patience and long-term investment strategies have delivered most consistent and superior returns for investors over time.
The power of steadily compounding returns over time is well understood. The math is obvious and incontrovertible. Yet it is equally obvious that the power of human emotion – fear and greed – too often dominate investor behaviour. And social media, our obsession with speed and just-in-time processing similarly primes knee-jerk behavioural responses to investing. This encourages shorter-term investment decision making – resulting in higher costs and typically lower returns.
Knowing when to invest isn’t as important as how long you stay invested.
As we navigate the peaks and valleys of market returns, investors should naturally want to jump in at the lows and cash out at the highs. But no one can consistently predict when those will occur. Of course, we all want to avoid declines.
An example using two hypothetical S&P500 investors over a 26-year period (Jan 2000-Dec 2025) highlights the investment value concept of time vs timing. Each investor contributed $10,000 every year. One investor picked the very best month (the market month with lowest close) each year to invest. This lucky investor would boast an IRR of 10.3% over the 26 year term. The other investor was unlucky and picked the worst month (market month with highest close) every year. The “worst-timer” achieved an IRR return of 9.1%. i.e. the cumulative investment of $260,000 had a value of $982,711 after 26 years. So even an unlucky investor, selecting the worst possible month end value each year to invest, enjoyed very credible returns. They just had to be patient and stay the course.
The longer the period, the greater the probability of a positive outcome
Over the preceding 91 yrs, the S&P 500 experienced negative index results in almost 1/3rd of those years. Shorter term investments produce negative results more often than investments held for longer periods. If short-term (1yr) investors were patient and held positions for 3 yrs, they experienced less than half as many negative return periods. The data highlights that the longer the time frame, the greater the probability of positive outcomes. Patient investors have historically been rewarded for long-term positionin
Upholding the Virtues of Patience and Discipline
SWAN’s US private real estate (Multifamily) investment approach:
- Create tax/cost-effective structures to access/hold high quality assets.
- Apply sufficient patience/time to reduce investment timing risk and to harvest compounding benefits
- Reinforce investment patience, with underlying investment project durations of 3-5yrs and funds structured as 5 year holds.
- Apply disciplined and rigorous due diligence analyses to deliver advantageous risk/reward positioning and conservative forecast modelling.
- Ensure healthy manager/investor alignment and regular, transparent reporting.
Rigorous analysis and detailed due diligence work is core to understand risks and to identify optimal risk-adjusted reward investment opportunities. Just as critically, we also apply discipline and patience to allow investment strategies sufficient time to efficiently harvest those risk-adjusted rewards.