"Time is Archimedes’ Lever in Investing - Archimedes is often quoted as saying, 'Give me a lever long enough and I can move the earth.' In investing, that lever is time. The length of time investments will be held, the period of time over which investment results will be measured and judged, is the single most powerful factor in any investment program. If time is short, the highest investments – the ones an investor naturally most wants to own – will be undesirable, and the wise investor will avoid them. But, if the time period for investing is abundantly long, the wise investor can commit without great anxiety to investments that appear in the short-run to be very risky. Given enough time, investments that might otherwise seem unattractive may become highly desirable. Time transforms investments from least attractive to most attractive – and vice versa – because, while the average expected rate of return is not at all affected by time, the range or distribution of actual return around the expected average is very greatly affected by time. The longer the time period over which investments are held, the closer the actual returns in a portfolio will come to the expected average.

The following table shows the compounding effect on $1.00 invested at different compound rates compounded over different periods of time. It’s well worth careful study – particularly to see how powerful is time. That’s why time is the “Archimedes lever” of investment management."

. . . Investment Policy, Winning the Loser's Game, by Charles D. Ellis

Chart 1


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Source: "Winning the Loser's Game," by Charles D. Ellis

According to Wikipedia, "Charles 'Charley' D. Ellis (born October 22, 1937) is an American investment consultant. In 1972, Ellis founded Greenwich Associates, an international strategy consulting firm focused on financial institutions. Ellis was appointed twice to the faculty of the Harvard Business School in 1970 and 1974 and to the Yale School of Management in 1986. At both Harvard and Yale, he taught advanced courses on investment management. Ellis served as a successor trustee of Yale University from 1997 to 2008, where he chaired the university’s investment committee for nine years alongside Chief Investment Officer David Swensen. He received the Yale Medal in 2009 for his service to the University. Ellis served as chair of the board of the Institute of Chartered Financial Analysts and is one of only twelve people recognized by the CFA Institute for lifetime contributions to the investment profession." We recalled his piece on “Time” while reflecting on a comment from Ron Baron, of Baron Capital fame, who told me his average holding period for a stock is 10 years!