Invest for the long term

Investing over a long time horizon brings many benefits:

  • Lower volatility

  • Most absolute benefits of compound investing come in later years

  • Higher tax efficiency if invested in appropriate vehicles (UK ISA, US 401k, etc.)

  • Asset price driven by “value” not “perceived value”

  • Many opportunities overlooked

  • Lower transaction fees (because it requires less active management)

  • More asset classes available

It also comes with unique drawbacks:

  • Requires nerves of steel

  • Lower liquidity

  • Lower feedback loops

  • Require more data, reasoning to support decisions

To quote Sam Altman:

One of the few arbitrage opportunities left in the market is time. I think we have gotten really good at High-Frequency Trading, we have gotten really good at [measuring] the price of things. We have gotten worse at [measuring] the long-term value. I don't think you can go and beat the market in a lot of ways. But the one way I do is by making a long-term commitment to something. My new belief for how long I should hold stock in the best companies I invest in is forever. In a world that is increasingly focused on the tick and the quarterly revenue cycle, you should go the opposite way.

References

Sam Altman: How to Build the Future