The Advantages of Investing for the Very Long-Term

Investing is often described as a marathon, not a sprint. This is especially true for very-long-term investing, a strategy that involves holding investments for many decades or even across generations. Forward-thinking individuals – particularly younger investors – stand to gain immensely from this patient approach. In this article, we’ll explore how time and consistency can turn modest investments into substantial wealth, why a “buy-and-hold” strategy can outperform frenetic trading, and how the power of compounding makes all the difference. We’ll also compare long-term investing with short-term trading or on-and-off investing, illustrating the benefits of staying the course (with opportunities for the reader to insert illustrative charts along the way).

What Does Very-Long-Term Investing Mean?

In simple terms, very-long-term investing means making investments with the intention of holding them for an extended period – typically several decades. Rather than seeking quick profits, a long-term investor is looking to build wealth gradually over time. This approach requires a forward-looking mindset and patience, as investors must be willing to ride out the market’s ups and downs in the short run for the sake of larger gains in the long run .

For younger investors, very-long-term investing comes naturally – you have a longer time horizon before goals like retirement. But even those who are not very young can adopt a long-term mindset for the portion of their assets meant for future generations or later-life needs. The key is thinking in decades instead of days or months. By doing so, you allow economic growth, business earnings, and interest to compound year after year.

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The chart above describes the power of compounding. It shows how a $1 investment at a 7% annual return grows over 130 years to $6,605.28¹. This is the power of compounding: the longer you invest, the more your money can grow exponentially. The earlier you start investing, the more time your money has to compound. Similarly, a $100 investment would return $660,528.00, and a $1,000 investment would return $6,605,280.00.

Also, an increase in the rate of return to 8% would increase the value of $1 to $22,135.44; $100 to $2,213,544.00; and $1,000 to $22,135,440.00. Those are impressive returns!

Modern investing strategies often focus on gains geared towards a typical retirement age of 65. However, many individuals are not able to start investing until later in their professional lives due to factors such as student debt, housing costs, and family obligations. This can lead to a sense of urgency to make up for lost time, resulting in a focus on short-term gains rather than long-term growth.

There are a variety of investment strategies which require constant attention and management that try to beat the market however the only true method is to invest for the long run. It is well understood that staying with safe investments for a long period will give the best chance of growth; not guaranteed growth.

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The long time horizon proposed at 130 years is longer than the oldest recorded person who lived to be 122; Jeanne Calment. If you are 30 years old today, you may expect your great-great grandchild to be alive at the time of the unlock date. Although, if advancements in science and technology prevail, then it may be more common for individuals to break this longevity barrier by surviving to see longevity escape velocity where scientific advancement allows for a person to live more than an extra year for every year that passes; essentially living indefinitely.

Proposing an investment strategy that relies on the investor to do the seemingly impossible task of surviving so long may seem impractical by some. However, there are major advancements in the fields of biotechnology and several futurists have suggested that we are on the verge of a major breakthrough in the field of longevity.

Even a small investment early with an accumulation period spanning decades can lead to significant wealth with reduced risk because of the long time frame.

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