Are Dead People Better Investors?
By Christian Gannon on March 26, 2025
“The first rule of compounding: Never interrupt it unnecessarily.” – Charlie Munger
https://www.flickr.com/photos/helenajansen/7948774998 As of 9/7/2012
Markets can be fickle. At various points it may feel more logical and rational than others. Short-term noise fills our airwaves and, more than ever before, our mind space. Thanks to a 24/7 news cycle and the ability to trade easier than ever before, we are inundated with information that tempts us to act lest we fall behind those savvy investors that are quicker to act. While the urge to respond to market fluctuations is natural, acting on these impulses can often be detrimental to long-term performance.
A now legendary study by Fidelity Investments in 2014 revealed that the investors who performed the best were those who had forgotten about their accounts and done absolutely nothing.1 I’m reminded of the old Ronco rotisserie cooker commercial. I’m sure you know the famous tag line, “Set it and forget it!” This study underscores the power of patience and the benefits of a hands-off approach. By avoiding the temptation to constantly tweak and adjust their portfolios, these investors allowed their investments to grow uninterrupted, reaping the rewards of long-term compounding.
Charlie Munger, the renowned investor and partner of Warren Buffett, famously said, “The first rule of compounding: Never interrupt it unnecessarily.” This principle highlights the importance of letting your investments grow over time without unnecessary interference. Compounding is a powerful force in investing, and by maintaining patience and resisting the urge to make frequent changes, investors can enhance their returns.
There are times when a change is warranted, but oftentimes the right investment decision may mean going against the investment idea of the day. As Howard Marks put it, “The safest and most potentially profitable thing is to buy something when no one likes it.” When everybody around you is saying, “Why would I ever want to own that,” that may be the space that you want to begin scouring for opportunities. This is not an exercise that should be taken lightly. Marks is a notoriously long-term and value driven investor. He often attributes success to “buying things well”. There may be good investments, however, finding the right entry point can be critical in managing risk.
Navigating the emotional ups and downs of investing can be challenging. This is where having a trusted advisor could make a difference. An advisor can provide an objective perspective, helping you stay focused on your long-term goals and avoid making impulsive decisions based on short-term market movements. They can serve as a sounding board, offering guidance and support to help you manage the emotional roller coaster that often accompanies investing.
