Everything meaningful we do requires us to focus on what is directly ahead of us. Every survival skill requires us to pay attention to the short term. Most things are predictable in the very near future, like bumping your head on a low-hanging branch or noticing those brake lights that just flashed two car lengths ahead of you.
Our brains are hardwired (lizard brain) by heuristics to key off immediate horizon events, ignoring the long term until it directly impacts us. This is the primary reason why long-term investing is so difficult; with markets, it is the short term that is unpredictable. Each day has barely a 50/50 chance of producing positive results, yet the 5-year results are rarely negative and much more predictable. Historically, staying invested over 20 to 30 years has provided dramatically better outcomes in all instances.
I believe this short-term behavioral propensity to “keep your eye on the ball” is the primary reason so many investors fail. While the long-term power of compounding wins, it does not come naturally, and it will always “feel” like the wrong thing to do.
- Dave
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.