A specialist trader works at the New York Stock Exchange on Nov. 19.Brendan McDermid/Reuters
In an era of algorithmic trading, financial influencers and round-the-clock market chatter, doing nothing may just be the most contrarian investment strategy left.
We live in a time that celebrates activity. Investors are encouraged to keep busy. Check your portfolio, adjust your allocations, rotate sectors, jump on the latest trend and react to the latest headlines. Trading apps flash red and green like slot machines, and pundits fill airwaves with “urgent” predictions that rarely age well. Everyone is told to make their next move now. But what if the best move – and the most profitable one – is simply to do nothing?
Some of the best investors in history have long known this. Warren Buffett has said his favourite holding period is “forever.” His late partner, Charlie Munger, put it even more plainly: “The big money is not in the buying or the selling, but in the waiting.” Still, most investors cannot help themselves. The instinct to act, especially when markets are volatile, is almost impossible to resist.
What the pandemic has to teach investors about surviving the trade war
Think back to the start of 2020, when the pandemic sent markets into freefall. The Dow dropped 37 per cent in just over a month. Many investors rushed to cash, convinced the world was heading for another Great Depression. Six months later, the market had already recovered nearly all its losses. By December, it was up 7.25 per cent for the year. Those who stayed put and did nothing were the real winners.
The same story played out in 2008. As the financial system crumbled, many investors bailed out at the bottom. Buffett, on the other hand, stayed calm, made a few high-conviction purchases and refused to panic. His patience was rewarded as markets rebounded and his stakes in Goldman Sachs and Wells Fargo soared.
Then this year, investors faced a similar test in April after U.S. President Donald Trump’s “Liberation Day” tariffs sent markets spiralling downward. Lots of people sold to “wait things out” in GICs or money market funds, only to watch the markets recover. Sitting tight with what you already own and buying into a downturn with cash on hand, though uncomfortable, turned out to be the better call.
Tariffs, TACOs, and dollars: global markets in a year of Trump 2.0
This pattern repeats over and over. Fear leads to selling. Selling locks in losses. Patience wins, quietly. DALBAR’s annual study on investor behaviour found that, in 2024, the average U.S. equity investor underperformed the funds they owned by 8.48 per cent, extending a 15-year streak of lagging behind the S&P 500. The funds did fine. It was human behaviour that failed.
Doing nothing is not apathy; it is discipline. It means building a sensible portfolio, then letting time, not constant tinkering, do the heavy lifting. Volatility is not the enemy; it is the price you pay for long-term returns.
Investors who held tight through 1998, 2001, 2008, 2011, 2020, 2022 and the spring of this year eventually saw massive gains. Those who sold early or tried to time the rebound turned potential wealth into permanent regret.
Ironically and unfortunately for investors today, it is harder than ever to sit still. Technology has made investing cheaper, easier and noisier. Commission-free trading, endless notifications and social media “hot takes” all tempt investors to act. Yet, oftentimes the hardest and smartest thing to do is nothing.
As Mr. Munger once said, “You don’t have to be brilliant, only a little wiser than the other guys, on average, for a long time.” That wisdom often comes from resisting the urge to react.
Patience does not trend on social media – but it quietly builds fortunes. The next time markets surge, wobble or tank and your phone lights up with breaking news, remember: The market is designed to test your temperament, not your IQ. In a world addicted to activity, stillness is a superpower. Sometimes, the boldest and most profitable decision an investor can make is to simply wait.
Caellum Gallander is a contributor to the Contra the Heard Investment Letter.