Motley Fool CEO Says The Fool's Edge Is a True 5-Year Time Horizon

Most investors' biggest stumbling block is that they focus on the noise in the news that won't really matter for companies over the long run

There's comfort in knowing you've got options

That's true in terms of careers, relationships, and even

Being able to exit a stock position whenever you want makes it much easier to enter that position in the first place

As is the case with anything in life though, just because you have flexibility doesn't necessarily mean you should always use it

Sometimes the smartest decision you can make as an investor is doing nothing

That's because a more active apach to often ends up chipping away at your total returns

That's a key takeaway from a recent interview with Motley Fool co-founder and CEO Tom Gardner

When asked the Fool's apach to picking stocks, he explained: "Our system is saying, we're looking five years out -- we're not the system that's trying to make the call in the next six months. " That seemingly off-the-cuff is the stuff of market-beating wisdom

More activity can easily mean smaller gains Gardner's entire thought was this: "Everyone needs to realize that our system is saying, we're looking five years out

We're not the system that's trying to make the call in the next six months

That can happen in financial media, elsewhere

That can happen in trading systems and trading sites

You can go to those sites for that up-to-the-second stuff

We can't help you in that area

But we do think history shows that systems ours are where the real money is made over the long term. " He's right

Most of the money made in the stock market is made over the long run

Or more specifically, most of the net gains the market dishes out are dished out to investors who buy and hold stocks for at least five years

More frequent trading can easily lead to results that lag the market's average performance

It might even drag you into the red

Standard & Poor's regularly some interesting statistics that support this claim

In its most recent comparison of passive index funds vs

Things don't get any better when you look at longer time frames, either

And for the record, it's incredibly rare for one of the leading performers in any given year to remain a leader in subsequent years

Hedge funds don't fare any better, by the way

Take the hint: Less is more There's a lesson for average, ordinary individual investors buried in the numbers

It's incredibly difficult even for fessionals to predict what the market or an individual stock is going to do over the course of any given few months

Indeed, stocks often do quite the opposite of what it seems they should do over short-term periods

Yet, predicting how the market or a particular stock is ly to perform in the long run isn't nearly as difficult for informed, disciplined investors

This seems counterintuitive

After all, the further down the road one looks, the blurrier the picture is apt to be

Image source: Getty Images

Except that it is the short-term view that's obscured by all the noise that can foment both fear and greed, and in the longer term, that noise often ends up meaning very little

The true nature of an individual company or an entire national economy, on the other hand, will actually shine through given enough time -- say, five years or more

As the legendary value investor Benjamin Graham once brilliantly put it, "In the short run, the market is a voting machine but in the long run, it is a weighing machine. " Your chief challenge as an investor is simply to distinguish between the short-term "voting" driven by meaningless noise and the long-term "weighing" that reflects the fundamentals

That's what The Motley Fool aims to do, by looking past the noise to focus on the five-year view

If you can do that, you'll enjoy a competitive edge that most investors don't

It's actually quite freeing once you learn to do this, in fact

In many ways, this mindset not only gives you permission to ignore headlines that won't really matter in the long run, it forces you to focus on the more important details of your spective investments

It also allows you to spend less time managing your portfolio so you can devote more time to more important matters your health, friends and family, and hobbies

In other words, working smarter rather than harder can leave investors with bigger fits than they'd be ly to achieve with a more activist apach

James Brumley has no position in any of the stocks mentioned

The Motley Fool has no position in any of the stocks mentioned

The Motley Fool has a disclosure policy.