Playing the Long Game with Investing

When it comes to relationships in life, short term relationships can be fun … for example imagine you’re traveling and you make a new friend and go out on the town. That can definitely give a temporary thrill. However, the relationships that add the most value to your life are typically ones you develop over a long time. Over time, you build a bond off of shared experiences and develop trust in one another.

You may not be aware of this, but investing works in a similar way. Your most successful strategy is typically to “buy and hold” an investment for the long term versus making lots of trades all the time.

Do you remember that scene in Office Space where he kept changing lanes in traffic? The lane he switched from would speed up while the lane he thought would be better would slow down. He would have been better off just staying in the lane he was already in.

There’s a lot to be said for patience and for committing to a course of action and sticking with it, both for an investor and for the venture in which they invest, or the investee.

Imagine it from the perspective of an entrepreneur or a startup founder. You have a great idea and you’ve invented a product you’re excited about. You need money to hire some people, buy supplies, and secure a location to actually produce your product. It’s important that your capital doesn’t fluctuate too much from day to day or you might not be able to pay your bills and carry your plans through to completion.

Unfortunately, the strong personal relationships needed to make such plans a reality have become much more rare in our society today. Electronic communication has often replaced phone calls and face to face meetings. One sees this phenomenon at its worst with bulk email and text messages from large corporations, where we’re treated like just part of a large generality and not an individual person.

While the modern era has brought us countless conveniences that have improved our quality of life, this is one area where the old way was better. Creating a longstanding partnership should be our priority instead of just a single deal. Such relationships don’t just pay off once but over and over.

One of my favorite ways to do business is to create such relationships. Not only is it more meaningful than a transactional approach; it also can create opportunities for higher returns. Startups and founders are actually willing to pay more interest on funds that come with a long term commitment, allowing investors to beat fixed rates otherwise available to them by a substantial margin.

For some people, it’s tempting to change things all the time. They start a workout program and they quit after doing it for a month because they look in the mirror and they’re not jacked yet. However, meaningful results take time. You have to keep going to the gym, keep eating healthy, and eventually you will be jacked. This principle also applies to how you invest your money.

Eric Eisenhammer

Eric is an Asset Protection Specialist and is co-founder of BeneficialHorizon Capital. He earned his bachelor's in Finance from California State University, Northridge.

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