The Rise Of Long-Term Thinking

Jan. 05, 2014 3:40 AM ETBEAR, RYJ, ONEF, SPY40 Comments
Felix Salmon profile picture
Felix Salmon

Morgan Housel has penned a rather odd column to mark the new year, declaring 2013 to be the year that "long-term thinking" died, with "his last true friend, Vanguard founder Jack Bogle," at his side.

The weird thing about this column is that long-term thinking isn't dead at all; in fact, it's never been healthier. Housel did manage to find a trader on CNBC exhibiting symptoms of short-term thinking - but that's what CNBC does, and in fact it's possible to use CNBC's ratings as a reasonably good proxy for the general prevalence of short-term thinking. Guess what: they're at their lowest point in 20 years, with the channel reaching just 38,000 viewers over the course of a day. That's a really tiny niche. A potentially profitable niche, to be sure, but tiny all the same.

Meanwhile, long-term thinking's true friends at Vanguard have never been healthier: the Vanguard Total Stock Market Index Fund is now the largest mutual fund in the world, having overtaken the Pimco Total Return Fund in October, and Vanguard's total assets under management are jaw-droppingly huge: they started last year at $2 trillion, and were already over $2.5 trillion by the end of June. I wouldn't be surprised if they were at or near $3 trillion by now. It's pretty safe to say that substantially all of that money is being invested according to the tenets of long-term thinking - and that it vastly exceeds the amount of money being traded on a daily basis by the 38,000 viewers of CNBC. (They'd need to have $80 million each to get to $3 trillion; and while CNBC viewers might be rich, they're not that rich.)

The height of short-term thinking, when it comes to investing, was surely the dot-com bubble, when everybody wanted to be a day trader, and everybody

This article was written by

Felix Salmon profile picture
Felix Salmon is a senior editor at Fusion

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