The patience problem

Summary: Drawing on insights from Charlie Munger and Peter Lynch, this piece argues that investor underperformance often stems not from poor choices but from excess activity and that patience is not a personality trait but a skill built through structure.

Back in August 2023, I wrote in these pages about Charlie Munger’s delightful use of the word ‘diworsification’, a term coined by Peter Lynch. Munger called it “absolute insanity” for investors to believe that owning 100 stocks makes them more professional than owning 4 or 5. The same logic, I argued, applies to mutual funds. Too many investors confuse the number of funds they own with the quality of their portfolio.

That column addressed one dimension of the problem: the what. Too many funds, too much overlap, too little real diversification. But as our cover story this month demonstrates, there’s another dimension that may be even more damaging: the how. Even sensibly constructed portfolios can be undermined by a different form of excess, not too many funds, but too much activity.

The data is striking. Investors systematically pour money into funds after strong performance and withdraw after weak spells. They treat cyclical outperformance as a promise and underperformance as a verdict. They rebalance too frequently, cutting winners and slowing the very compounding they seek. The pattern is consistent: the enemy of good returns isn’t poor fund selection. It’s investor restlessness.

Here’s what I find most interesting. When I discuss these findings with investors, the response is almost always the same: “I know I should be more patient, but I’m just not wired that way.” There’s an implicit assumption that patience is a personality trait, something you either have or don’t, like being tall or having curly hair. Patient investors are a special breed, this thinking goes, and the rest of us must simply accept our fidgety nature and the inferior returns that come with it.

I don’t buy this. Patience in investing isn’t a temperament you’re born with. It’s a skill you build. And like most skills, it’s built through structure, not willpower.

Consider what our cover story calls the “portfolio operating system”: a framework where every fund has a defined role, where you accept ranges rather than precise targets, and where you switch only when a fund stops doing its assigned job, not when ratings slip, or markets rotate. This isn’t a system for naturally patient people. It’s a system to help ordinary people behave patiently.

The distinction matters. When patience is seen as a personality trait, investors who lack it feel helpless. They think their only options are to fight their nature, rarely effective, or to accept that long-term investing isn’t for them. But when patience is treated as a structural outcome, everything changes. You don’t need to become a different person. You need a system that makes patient behaviour the path of least resistance.

This is why the “rhythm not surveillance” principle from our cover story resonates so strongly with me. Monitoring your portfolio quarterly or semi-annually isn’t about having superhuman restraint. It’s about removing the constant stimulation that triggers unnecessary action. You’re not suppressing the urge to tinker; you’re eliminating the conditions that create the urge in the first place.

Twenty-three years of publishing the Mutual Fund Insight magazine have taught me that the investors who succeed aren’t those with some rare gift for emotional detachment. They’re the ones who’ve built guardrails around their own behaviour. They’ve accepted that investing demands endurance rather than optimisation, and they’ve structured their portfolios and their habits accordingly.

If you’ve ever thought you’re simply not cut out for long-term investing, I’d encourage you to read our cover story with fresh eyes. The problem may not be your temperament. It may be that you’ve been trying to solve a structural problem with willpower alone.

Also read: Do less, earn more