By ROBIN POWELL
If there’s one piece of advice I like to give investors it’s to take the long view.
Many people do the complete opposite: they obsess about short-term performance and what’s happening in the here and now. Worse, they’re positively encouraged to do so by the investing industry, and by large sections of the financial media, and, gallingly, even by some financial advisers.
That kind of approach is totally nonsensical. No one knows how the financial securities will perform in the short-to-medium term. But throughout financial history, the capital markets have almost always rewarded patient and disciplined investors who stayed focused on their long-term goals — as long as they were sufficiently diversified.
Personally, I find it liberating to have a long-term investment perspective. I really used to worry about volatile markets and gloomy forecasts. Nowadays they honestly don’t bother me at all. In fact I like market corrections. Why? Because they make equities more affordable and increase their expected return.
Can taking the long view help in other ways?
I recently read an article that made me wonder whether having a very long time horizon can improve our lives in other ways. It was written by a BBC journalist called Richard Fisher, who’s just had a book published called The Long View. Fisher has an informed interest in both geology and futurology, so he’s used to thinking in terms of decades, centuries, millennia and even Eons, rather than days and hours.
The central argument of Fisher’s book is that the attention economy, social media and the 24-hour news cycle have encouraged human beings to focus on the short term more than ever before. To put it another way, modern life has made us very short-sighted.
Tens of thousands of years ago, human shortsightedness was beneficial. It kept our prehistoric ancestors focused on what they needed to survive — particularly finding food and avoiding predators. But, Fisher explains, this same myopia may now be ushering us toward our own downfall.
Short-termism skews our priorities
The most obvious example of this is climate change. Most of us now understand that man-made global warming is affecting the climate. We also know that the consequences are extremely serious. But the worst effects of climate change seem so far into the future that we just don’t give it the undivided attention it deserves. It takes a freak weather event in the news for some people to give it any thought at all.
Politics is another area in which short-term thinking causes us problems. Right across the party divide, UK politicians are fully aware of the biggest challenges we face — addressing the growing crisis in long-term care, for example. But the democratic process often means putting those very same issues on the back burner. As the former European commissioner Jean-Claude Juncker once said, “We all know what to do. We just don’t know how to get re-elected after we’ve done it.”
What’s in it for us?
But what about our own health and wellbeing? Can taking the long view benefit us as well as the planet and wider society? The answer is a resounding yes, it can.
Take dieting, for instance. The diet industry, like the investing industry, deliberately appeals to our impatience and short-termism. It offers us a quick fix to a problem that probably developed over many years. The evidence repeatedly shows that, although dieting can and does deliver short-term results, most people who go on a diet end up just as heavy, if not more so, than when they started.
It’s only by eating healthily and exercising day after day for a long time, and by changing our habits for good, that we bring about lasting change.
The long view makes now more meaningful
As well as physically, Richard Fisher suggests that the ability to take the long view is good for us mentally and spiritually too. He admits it has its downsides — it makes us aware, for instance, of our own mortality — but he says he nevertheless views it as a gift. For a start, it can help you to see positive social trends, like improvements in health care and access to education, and not just negative ones.
“It allows me to see how far our imperfect species has come,” he writes, “and the clarity to see the possible paths ahead — a plural future, rather than a singular one.
“Sometimes, it is a perspective that allows one to transcend the stresses of the moment. Other times, it offers guidance in periods of uncertainty. Often, it provides principles for understanding the world.
“But most of all, it is a way of seeing what matters most within the here and now. The long view, I believe, can make the present more meaningful.”
How can you develop a long-term mindset?
So having the ability to project your mind across the long-term past and future is beneficial in many ways. But how can we develop the long view mindset? How do we shake off our obsession with the here and now?
Both Fisher’s book and another by Jim Brumm — Long-Term Thinking for a Short-Sighted World — make some helpful suggestions.
For example:
- View your anxieties and frustrations through the lens of history. Most people in Britain today enjoy a quality of life that most previous generations could only have dreamed of.
- Be inspired by people who took the long view in centuries past and worked on projects they knew could never be completed in their own lifetime — building cathedrals, for example.
- Learn from other traditions. Adherents of the Zoroastrian religion, for example, cultivate a sense of duty to future generations by keeping fires going for many hundreds of years.
- As well as being a good citizen, try to be a good ancestor. And remember, issues like social, racial and sexual inequality won’t be resolved in our lifetime, but we can all play our part now. This is our time to make a positive difference, so let’s not waste it.
- Reduce your carbon footprint. True, you may not be alive when humanity really starts to pay the price for failing to tackle climate change. But your children and grandchildren probably will. We also owe it to those not yet born to do what we can now.
- Support local food producers and other local businesses, which by their very nature play an essential role in society by keeping communities strong and focused on the future.
- Don’t take on bad debt. Being in debt is itself an example of shortsightedness. Essentially you’re saying, “I’ll buy this now and worry about paying for it later.” Instead of material possessions, focus on things that boost your long-term happiness.
One final thing: if you don’t yet have a long-term financial plan, with a long-term investment strategy to match, why not get in touch with us at rockwealth? You surely have enough to think about without having to worry about the ups and downs of the markets or having enough money to last you through retirement.
The Long View: Why We Need to Transform the Way the World Sees Time by Richard Fisher is published by Wildfire, an imprint of Hodder Headline.