Greg Wilson

From Greg Wilson, chief analyst, the Legacy Portfolio: “You are in the hands of market psychology… It’s human nature to shrink from pain.”

This observation came from legendary fund manager Jean-Marie Eveillard. His First Eagle Funds returned 15.8% per year over the length of his 26-year tenure. I heard him speak at the 12th annual Value Investor Conference last month.

Fear of pain is why typical investors flee at the first sign of trouble. They lack a deep understanding of their investments. They lack commitment to hold for the long term. And they tend to sell at the most inopportune times.

This short-term mentality costs most investors.

Morningstar confirmed this in a study measuring the performance of large-cap (i.e., with a market value over $10 billion) value funds from 2003 to 2012. The funds returned an average of 6.7% per year.

Yet, the typical investor in those same funds made only 5.5%.

Investors underperformed because they bailed when the stock market dipped, and failed to capture the subsequent rebound.

They fell victim to market psychology.

Investors would be better off following the words of Eveillard:

The success we’ve had over the years has a lot to do with the fact that we don’t try to keep up with the Joneses on a quarterly or even past-year basis. It’s the willingness to take short-term pain that distinguishes us from other investors. We’re looking to reward our long-term investors.

Eveillard described a stock he purchased at $25. It did nothing for four years, but doubled in the fifth. He sees this as doubling his money in five years, which is a good outcome. He doesn’t buy into Wall Street’s view that the investment was “dead money” the first four years.

This is the same mentality we bring to our Legacy Portfolio—our collection of elite, global powerhouse companies. It’s the safest, surest way to amass significant stock market wealth.


But it doesn’t work if you embrace short-term thinking and get scared out of the market…

  Right now, fear surrounds the industry of one of our Legacy stocks. It’s depressed the company’s share price to four-year lows. But, over these four years, this cash-gushing company has been a relentless dividend-raiser.

Its dividend is now 37% higher than it was the last time the stock traded at this price. And that represents enormous value in a global titan that yields almost 5% today.

Investors are crazy to ignore this stock.

We have a thorough understanding of the companies in our portfolio. It gives us confidence to hold our stocks for the long term. We’re not swayed by short-term pain.

And that’s why our Legacy investors sleep soundly at night… as they let others fret about short-term market gyrations. They just sit back and watch their dividend payouts grow, year after year, relentlessly.

Reeves’ Note: The Legacy Portfolio is closed to new members right now, but you can sign up for our waitlist right here. Mark, Tom, and Greg will send you updates and educational resources on the strategy in the time before our next open enrollment period.