In a world of up-to-the-second information, and the ability to check stock prices throughout the day, having the patience and the ability to stay away from checking how your portfolio has performed over the last 15 minutes can be hard to do.
Recent studies showing that an average portfolio of a dead person outperformed a select group of hedge funds and actively-traded portfolios puts into perspective where the real value in long-term investing lies – and that is, largely, in doing nothing.
The ability to pause and understand that instead of bailing out when everyone else is doing so, continuing to buy on the way down may indeed produce the best overall returns for investors over the long-term can be difficult to do as you see your portfolio go deeper and deeper into the red.
That being said, an investor with even a small amount of cash flow he or she is able to put into the market every month, or quarter, or year, will be much better off doing so over the long run if he or she just holds onto existing positions and adds to his or her portfolio in a way which minimizes risk and maximizes long-term returns over time (through diversification and buying stock in large enough batches to minimize trading fees).Indeed, keeping trading fees low and continuing to diversify are truly the only two levers long-term investors have to beat the average hedge fund. As the world may be crumbling around you, realize the opportunity, hoard cash, and buy as much as possible at rock bottom prices.
Invest wisely, my friends.