In reading through Charles D. Ellis’s Winning the Loser’s Game, source of this month’s cover article, I was especially taken by a chapter titled simply “Time” (much of which we included in our excerpt).

It’s not that what Ellis wrote was new to me, but that he conveyed some familiar truths in provocative ways. For example:

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.... Given enough time, investments that might otherwise seem unattrac­tive may become highly desirable....

The patient observer can see the true underlying pat­terns that make the seemingly random year-by-year, month-by- month, or day-by-day experiences not disconcerting or confusing but splendidly pre­dictable — on average and over time. Like the weather, the average long-term experience in investing is never surprising, but the short-term experience is always surprising.

I had not thought of it in those terms before, that one’s long-term investing experience is never surprising. He means that, over the long haul, there’s a relatively small gap between what one expects to earn and what one actually earns. Since 1950, the average return from a broadly diversified stock portfolio split evenly between large- and small-company stocks and held for 30 years was +13.0% annually.

If you knew that going in, it would have governed your expectations. And, as it turned out, you wouldn’t have been sorely disappointed no matter which 30-year slice of the past 66 years you owned stocks. The worst you could have done was +10.2% per year (7/1986 - 6/2016) while the most you could have earned was +16.7% annually (1/1975 - 12/2004).