The above terms are classic marketing tag lines which have been hammered away at people for decades now. The interesting part is that from a consumption and consumer point of view, it has structurally changed the way we spend.
The thoughts of patience, perseverance and sacrifice/trade offs in today's world are mostly considered negative terms. In some regards, these might be considered traits possibly of the past or conjure up thoughts of frugality which for some maybe uninviting ideals.
What is of particular interest, is that the instantaneous consumption patterns now seem to have also been filtering into the investment world as the approach people take with day-to-day investing.
Let's look at one example which is the average holding period for an investor when they acquire a share.
- In around 1960 it was around 8 years the average holding period
- In around 1970 the hold period reduced and was around 5 years.
- In around 1980 it was around 3 years
- In around 1990 it was just over 2 years
- In 2000 it was around 14 months
- Today the current holding period of a share is around 6 months
The above figures I find particularly interesting on so many levels. One of the most valuable pieces of insight from this data could be potentially the inefficiencies that this might create in the share market.
John Templeton, a famous investor, statistically believed that on average you needed to hold a company/share for around 5 years to allow a missed priced investment to come to full realisation.
We often too find that some of our greatest ideas may percolate for 8- 9 months doing very little and then break out upwards in a wild rush of excitement when the market realised they had misplaced this company. In some cases the time period can be even longer stretching out years, and yet the price adjustments sometimes leaves me scratching my head thinking "why did they not see this earlier?"
In reality, most investing in growth-based assets, whether it be a share or property, tend not to operate like a bank account which credits interest each day. Most growth assets move in surges and periods of rest. I guess somewhat similar to life and how a human operates in that we move then we sleep.
With investing, sometimes it comes back to also thinking differently to the general herd. This unfortunately requires patience and perseverance and sometimes sacrifice with a savings plan or retain capital in an investment that is building for tomorrow, as opposed to spending the capital or cash today.
Like most great ideas, holdings periods need to be considered with the greater global framework and market place. Sometimes shorter holding periods may be appropriate if there is upcoming drama or uncertainty. A well structure approach however gives consideration to balancing these elements.
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