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3 highly underrated human qualities which greatly impact investment performance

By Robin Powell - February 20, 2020

Patience, discipline and delayed gratification are rarely mentioned in the financial media…

Despite being crucial for long-term investment success.

They also happen to be qualities distinctly out of tune with the times.

In fact, the times we’re living in are almost antithetical to long-term investment.

We are overwhelmed by choice.

We are told we can have everything we want right now.

And if we can’t afford it?

We can swipe our credit cards and worry about paying for it later.

All gain, no pain has a ready market

There’s a ready market for the notion of all gain, no pain.

Diet magazines promise perfect bodies with little expense or effort.

The investment management world is no different.

Traditional financial services and the media want people to believe that investment returns come down to “hot tips” and easy shortcuts.

The giveaway pitch?

“High returns with low risk”.

A dissenting view about the instant gratification, you-can-have-it-all-right-now economy has been memorably expressed by Charlie Munger:

“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” 

Perhaps it’s due to the nature of modern consumer capitalism.

It encourages people to pursue an endless and unquenchable cycle of externally generated desires.

The notion of delayed gratification is out of tune with the times.

But the ability to forgo today’s desires for the prospect of longer-term fulfilment is an essential requirement for investment success.

We have to be able to resist the temptation to tinker and the lure of short-term returns.

Again, Munger puts it:

“People are trying to be smart. All I am trying to do is not to be idiotic, but it’s harder than most people think.”

Hourglass investment

One in five don’t plan for the long term at all

There’s a recent report by the UK online wealth management firm MoneyFarm.

It looked at why society finds it difficult to invest in their future well-being.

And, are so easily distracted by short-term temptations.

The research found:

  • 21% of Britons don’t plan for their long-term future at all
  • 25% think less than six months ahead
  • 29% only plan five years ahead

The causes of this short-termism are many, the report says.

They include a surfeit of choices and a subconscious view that by opting for one we limit our own freedom.

Another factor is that thinking about our long-term future creates anxiety…

Which we treat with instant consumption.

How should you deal with it?

The report recommends a number of strategies.

You could imagine the most positive outcome from a change in your financial behaviour…

And consciously think about the biggest obstacles getting you there.

Social support is important

 Another underrated technique is galvanising social support around your goals from friends, family and professional advisers.

As Munger says…

Waiting patiently, not doing stupid things and staying focussed on a long-term goal is hard to do alone.

But the first step is setting the goal and building a plan to achieve it.


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