Think like a monopoly

We know that in business, competition limits return. That’s why monopolies are so powerful -- they have no competitors, no one to threaten their profits, and no one to muscle in on their territory. It’s ironic, then, that so many investors compete for the same dollar. While most investors focus on getting the best month or quarter-end return, does it make sense to think longer? If we can find a timeframe where we encounter the least amount of competition from other investors, might we achieve a monopoly on good return?

I went through US stock market data since 1950 to put the following table together. It shows how the success of an average investor can be determined by their timeframe. For example, if an investor checked their portfolio of the US market daily, they would have about a 53% chance it would be higher than the day before – that’s about a coin toss, a roughly even mix of good and bad days. But if that same investor checked their portfolio only once a year, they have a 73% chance it will be higher than the year before. You’ll notice the results get even better as you extend the timeframe. That’s because a very small near-term positive edge is allowed to compound over time.

Sometimes good results are not a function of what you’re holding, but how often you look. Focusing where others don’t allows us to think like a monopoly, turning time into our advantage. 


Ben Kizemchuk is a Portfolio Manager & Investment Advisor with Altus Securities Inc. in Toronto. He offers financial planning and investment management for high net worth Canadian investors. Ben focuses on high quality investments, the Growth and Income Portfolios, low risk investing, and reducing tax.