One of the biggest mistakes investors make is to get caught up in the day-to-day news and the plethora of economic data they are bombarded with through the media network.  This causes investors to be increasingly focused on short-term performance.  In my opinion, this is to their detriment.  The more frequently one checks their investment performance, the more likely they are to be disappointed.  In 1984, Warren Buffet did a study of unrelated money managers that had compiled an outstanding record of long-term performance.[1]  All the managers adhered to a value style of investing, meaning they bought companies that were undervalued.  Buffet’s study was later revisited by Columbia University’s Eugene Shahan.[2]  What Shahan found was that these elite money managers underperformed in over 30% of the years covered.  These managers did not panic or alter their investment strategy and were well rewarded for sticking with their plan.  The group earned 13.7-23.8% per year over periods ranging from 13-28 years.  This was 7% over the return of the stock market during these same time frames.  The moral of the story:  impatience by investors can sabotage an investment managers’ results.  Additionally, money managers can achieve superior long term records despite disappointing 3 plus year periods.  By listening to the noise, one is more likely to get stressed and make decisions that can be hazardous to your wealth.  My advice: turn off the TV and radio and avoid the financial noise.


[1] Source: Buffet, Warren E. “The Superinvestors of Graham & Doddsville” Hermes, the Columbia Business School Magazine (1984)

[2] Source: Shahan, V. Eugene, “Are Short-Term Performance and Value Investing Mutually Exclusive? The Hare and the Tortoise Revisited” Hermes, the Columbia Business Magazine (1986)

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