Investing is a complex issue. It’s also a long-term job. Take a look back in history and the idea behind investment was to make money available for businesses to grow. That takes time and involves handing over your money for periods measured in years rather than weeks or months.
It’s no coincidence that some of the best performing funds of 2020 were those that have invested in the same companies for many years. The shares are now worth multiples of the price the investment managers paid for them. It’s about patience. What’s interesting is that these managers chose to hold on to the shares rather than take profits, even after they had risen strongly. That’s because the analysis they had done before buying suggested there was more share price growth still to come.
One reference point often used by successful fund managers is the “marshmallow test”. This is an exercise that psychologists use to measure children’s behaviour. It involves offering a child a marshmallow and asking them not to eat it. They are promised another one 15 minutes later if they manage to resist the temptation. The exercise is about deferring instant gratification in favour of greater long-term rewards – in this case, the children who held off doubled their enjoyment.
If the idea of patient investing is something that interests you and you, contact us to discuss financial planning in Chester and how we can help achieve your investment goals over a range of time periods.