Deep within the heart of a mountain in west Texas, a giant clock is under construction. Hundreds of feet tall and built of the sturdiest metals, this engineering marvel is designed to tick for 10,000 years. Occasionally, it will chime, but it will never repeat the same melody—not once in a deca-millennium.
This is not science fiction. The Long Now Foundation has begun this multi-decade project with the hope that it inspires long-term thinking and encourages us to consider our impact on future generations. It is certainly a refreshing undertaking in a world so often obsessed with the latest tweet, scandal and earnings release.
Although investors are often told to take a long-term perspective, the investment industry itself is set up to encourage short-term thinking and behaviour with its constant barrage of data and news. It can be easy to get caught up in the information overload and noise. But that type of short-term thinking can frequently lead to poor investment decisions that are based on emotion and cognitive bias rather than a prudent assessment of risk and return.
Short-term thinking can frequently lead to poor investment decisions.
A long-term perspective is not only possible for investors—it is often a distinct competitive advantage. Not only does this mindset allow investors to distinguish between signal and noise, it is essential in building portfolios that are resilient. This is why “think long term” is a bedrock value within our investment culture at Mawer.
So how can investors cultivate a long-term focus? In our experience, it’s facilitated by having a consistent and systematic investment approach. Such an approach helps investors to ignore market noise and shift their focus to key drivers of long-term growth. At Mawer, our approach is to systematically build diverse portfolios of wealth-creating companies, with excellent management teams, that can be purchased at an attractive price. We look for companies that will stand the test of time. And no matter what the market outlook, we consistently adhere to this approach.
It may sound boring to eschew the market thrill ride in favour of taking a long-term approach, but in our 40 years of experience, boring works. The giant clock is a good reminder to maintain that perspective.