2 Everlasting Lessons for Investing Success

The late investor Walter Schloss may not be a well-known name even within investing circles.

But his long-term investment results may be worth a second look – quite simply, his returns are stunning. Schloss’s investing firm, the WSJ Partnership, had generated annualized returns of 21.3% per year from 1956 up till the first quarter of 1984. For perspective, a $1,000 investment that compounds at 21.3% annually for 28¼ years would become more than $233,000.

Given his accomplishments, there may be investing lessons we can pick up from Schloss. This is where a 1985 interview of him with Barron’s can help. The interview is more than three decades old, but some of Schloss’s comments in there are still applicable and valid even today. Here are two takeaways I have from the interview.

The value of patience

“You have to have patience in this field. But quite often stockbrokers aren’t too interested in a stock you can sit there for five years with.”

The stock market’s return from one year to the next is hard to predict. But if we have a timeframe that is measured in years (emphasis on the plural) or decades, then the probability of us obtaining positive investing returns may improve.

Let’s look at one example. My colleague Chong Ser Jing has previously noted that if we were to measure the Straits Times Index’s (SGX: ^STI) returns at the start of every month from January 1988 to August 2013, the probability of making a negative return over a one year holding period is around 41%. Meanwhile, the probability of making a negative return over a ten year holding period is just 19%, a much lower figure.

Time is on the side of the long-term investor.

Staying focused

“I try to be removed from the day-to-day. I don’t have ticker tape machine in my office. I try to stay away from the emotions of the market. The market is a very emotional place that appeals to fear and greed … all these unpleasant characteristics that people have.”

In investing, we may be better off checking our emotions at the door. Looking at daily share prices may not be a worthwhile activity and it may cause us to make investment actions that are based on emotions rather than rational thought.

The underlying business behind the ticker may be where we want to keep our eyes on.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.