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# Patience is a virtue, and a proven method for building wealth
- URL: https://www.smdp.com/patience-is-a-virtue-and-a-proven-method-for-building-wealth/
- Published: 2006-04-27T15:00:00.000Z
- Updated: 2026-10-23T17:40:12.000Z
- Author: Guest Author
- Tags: Business, Santa Monica, #archive-import

*By DR. DARIUS G. GAGNE, CFA, CFP Special to the Daily Press*

Markets go up, and markets go down, but over the long run, markets go up.

On a daily basis, we are inundated with financial information from shows such as CNBC, NPR or even the “market update” during a basketball game. This deluge of information makes the investment world appear challenging and overly complex, insinuating that investors need to discover the latest and greatest tip in order reap the rewards that the market has to offer. Fact of the matter is, no one has a crystal ball. Fortunately, however, no one needs one because good long run returns are simply there for the taking.

Consider the plot above. It is not by chance that $1 invested into the S&P in 1926 would be worth much more today, namely $2,662\. This is a manifestation of our capitalistic market economy which is nearly 200 years strong and which implies that fair returns must be earned in the long run or else the system would not exist, that is, there would be no capital invested. In other words, markets work. Markets sky rocket in some years, while in other years they disappoint, but over the long run, an investor earns a fair return on his capital at risk.

But not everyone is convinced. For instance, this growth of $1 over the 80-year period represents over a 10 percent average annual return. Not a bad return. Not a staggering return. Just the average U.S. equity market long-run return. But you would be surprised how few financial advisers achieve this return over the long run. Why? Because they think they need — and worse, they think they have — a crystal ball. They try to outsmart the financial markets with speculation and market timing, or the thought that they somehow know more than the rest of the world combined.

Well, the financial markets embody the collective wisdom of millions of investors around the globe communicating at the speed of light. And the financial markets are extremely efficient, meaning that any hot idea one might have is almost certain to already be reflected in the markets. So, it does not matter how smart a money manger is, he will not out-smart the markets in the long run.

Investing is the responsible and discipline act of joining the markets to take advantage of long-run returns. In fact, earning solid returns over the long run is the easy part of investing. The biggest challenge in investing is discipline — sticking firm to your investment plan in the face of the deluge of short-term focused financial news and its resulting short-term volatility.

So, if markets work, does that mean everyone should just buy the entire market and earn an average 10 percent long-run return? Absolutely not. Stay tuned for a future article which will describe in detail how to divide up or segment the markets along key dimensions of risk and return in order capture any one of a wide range of long-run market returns.

*Originally published in the Santa Monica Daily Press print edition on April 27, 2006.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/042706.pdf?ref=smdp.com)