Study: Discipline is Key to Long-Term Investor Success

“The average long-term experience in investing is never surprising, but the short-term experience is always surprising.”

–Charley Ellis

Warren Buffett, George Soros, and Peter Lynch are all names synonymous with superstar investors. Their returns are legendary – so much so that they have become household names even outside of Wall Street. Buffett’s track record goes back over 40 years, during which time he more than doubled the return of stocks. Soros, known for his famous bet against the British pound and nicknamed “the man who broke the Bank of England,” has also produced long-term performance numbers that are well above average. And Peter Lynch, the former manager of the Fidelity Magellan Fund, averaged almost 30% per year return from 1977 to 1990, consistently more than doubling the S&P 500.

How did they do it? Well, although these three legendary investors had slightly different philosophies and investing styles, they had one key ingredient in common: discipline.

Obviously many investment strategies simply don’t work; however, it’s also true that there is more than one way to make money as an investor. A recent study by AQR examined the track records of Buffett, Lynch, and Soros and identified key factors that were unique to each of them. According to the study, Buffett tends to focus on value, quality, and limited downside risk, while Soros studied currency and global market trends. For his part, Peter Lynch emphasized factors such as size and momentum in the stocks he bought.

And so, there is no doubt that some of credit for their success is due to their ability to recognize these key factors and to implement them in their investment decisions. But that’s not all there is to the story. After all, anyone can pick up a copy of “The Intelligent Investor” by Benjamin Graham, Warren Buffett’s mentor, and learn about fundamental analysis and value investing. There’s very little unique knowledge on the Street today that’s not available to anyone with the time and energy to do the research.

But if that’s the case, why is it that the average professional investor actually underperforms the market, after fees, over the long term? Could there be another crucial ingredient? The AQR study revealed that in addition to their intelligence and skill, having the discipline to keep a long-term viewpoint (even when the markets aren’t working for you) was crucial to these “superstar” investors’ success.

We have also long believed in the importance of investing with discipline. In fact, it’s listed among our firmly held core beliefs that guide us as investment managers. This discipline plays itself out as we constantly look to identify undervalued assets and asset classes and then reposition accounts to take advantage of these opportunities. Having discipline means we seek to do so whether or not the markets are moving in our direction at that particular point in time, because fundamentals win over the long-run.

To quote directly from our core beliefs:

Because fundamentals matter over time–but not all the time–we must be prepared to be patient and wait to be right… when an investment is hugely popular it is probably overpriced (everyone has piled in and driven up the price), and when an investment is hated, relentless selling probably means the asset is a bargain. But any conclusions must be based on analysis of the fundamentals, not just on contrarian instincts.

To some degree, I am aware of my natural contrarian hard-wiring, and I actively fight that to turn the focus on the fundamentals at all times to make sure they consistently support the investment thesis. If you have any questions or would like to discuss further, please do not hesitate to reach out.

Authored by:






Jon Houk, CFP®

Wealth Advisor, Portfolio Manager

Wealth Management, Investment Strategy



The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.