- Fees and dividends have a much bigger impact on investor returns over the long-term than the short-term
- Future technological change is a factor which should only play on the minds of long-term investors
The Brothers Grimm told a fairy tale, Hans In Luck, in which the protagonist starts with a big lump of gold and makes a sequence of trades each one of which seems reasonable, only to end up with nothing. This story applies to investors, because we too can lose money in the long run because of decisions that seem sensible in the short.
One example of this is trading itself. Any individual trade seems reasonable, like Hans trading his gold for a horse. But taken altogether trading costs us money. As Brad Barber and Terrance Odean concluded in a classic paper, investors “pay a tremendous performance penalty for active trading”.