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The most important investing skill doesn’t involve performing advanced technical analysis or picking hot stocks. It’s something much simpler: Patience. Decades of market data and behavioral research show that disciplined, long-term investors consistently outperform those who chase quick wins or react emotionally to short-term volatility.
“Investing is about building wealth steadily over time,” Yvan Byeajee, author of “Trading Composure: Mastering Your Mind for Trading Success,” told Investopedia. “The key phrase is over time. If you’re chasing instant riches, the odds are that you’ll accept gambles that are unlikely to pay off.”
In other words, the ability to wait without flinching through market ups and downs is one of the most powerful advantages an investor can have. It’s not about timing the market, but time in the market that builds lasting wealth.
Key Takeaways
- Patient long-term investors have historically earned higher returns and experienced less risk than those who trade frequently or attempt to time the market.
- Dollar-cost averaging can help you put patience into practice, automatically buying more when prices are low and less when they’re high.
- The power of compounding dramatically increases wealth for those who stay invested over the long term, turning modest returns into substantial gains over time.
Proof That Patience Pays Off
Market history is clear: the longer you stay invested, the better your odds of success. Over the past century, the average annual return of the S&P 500 has been about 10%, but this figure masks wild short-term swings. For example, in 2022, stocks represented by the S&P 500 dropped 19.4% in value, but gained 24.2% the following year. That said, those invested over the long haul would have seen a significant upward trend over time, despite this volatility.
A 2023 Morgan Stanley report analyzed the probability of losing money in the MSCI World Index over different time horizons from 1970 to 2023, finding that investors were much less likely to lose money the longer they stayed invested. For example, over a one-year investment horizon, 23% of months resulted in negative returns. But over a 10-year investment horizon, that figure dropped to just 3%.
Dollar-Cost Averaging: Patience in Practice
Dollar-cost averaging is patience put into practice. By investing a fixed amount regularly—regardless of market conditions—you automatically buy more shares when prices are low and fewer shares when they’re high. This disciplined approach removes the temptation to time the market and reduces the impact of volatility on your portfolio.
The chart below illustrates how a simple $50 monthly investment in the S&P 500 would have grown over time, transforming consistent contributions into wealth despite market fluctuations. Part of the reason for the gains is the power of compounding—earning returns on both your original investment and the interest it generates.
Emotional Discipline: Avoiding Costly Mistakes
Impatience often leads investors to buy high and sell low, chasing trends or fleeing during downturns. A quantitative analysis of investor behavior by Dalbar, a market research firm, shows that the average investor earns far less than the market due to poor timing decisions. For example, the average equity investor gained about 16.5% in 2024, compared with the S&P 500’s 25.05% gain. The difference? Emotional reactions to short-term volatility.
Warren Buffett, perhaps the world’s most famous investor, attributes much of his success to patience. “My life has been a product of compound interest,” he told Bloomberg in a 2016 interview.
In 1985, Buffett explained Berkshire Hathaway’s decision to help finance Cap Cities’ $3.5 billion acquisition of American Broadcasting Companies (ABC). “For Cap Cities, ABC is a major undertaking whose economics are likely to be unexciting over the next few years. This bothers us not an iota; we can be very patient,” Buffett wrote in Berkshire Hathaway’s shareholder letter that year. “No matter how great the talent or effort, some things just take time: you can’t produce a baby in one month by getting nine women pregnant.”
Ten years later, the Walt Disney Company (DIS) bought Cap Cities and ABC in a $19 billion deal.
The Bottom Line
Patience is the single most important skill for building long-term wealth. The data is clear: Those who stay invested, resist emotional reactions, and let compounding work its magic are rewarded over time. The next time markets get rocky, remember: Your greatest advantage is the ability to wait.
