In investing, it is said that the ones who turn over the most rocks make the most money. This is often true. Warren Buffett famously scoured the Moody’s manual for years on end, which was a publication comprised of hundreds of stocks and their histories, management, valuations, and more.

While he didn’t find a new investment opportunity on every page, he turned over a vast number of rocks, and his track record is proof that the process works.

But before surveying the investment landscape, you first need to define your investment philosophy. Some enjoy holding periods of days or weeks, while others define their ideal holding period as infinite. Others prefer to buy at cheap or fair prices based on historical valuation, absolute valuation, or industry valuation.

By defining a clear strategy and holding period, you start to develop a playbook and an internal scorecard that allow you to invest according to your own rules, not in comparison to your next-door neighbor Ethan making 150% on a 0DTE option trade.

Among the many investing philosophies, I'd like to focus on one in particular, backed by decades of high-quality data.

Time Arbitrage: The Secret to High and Consistent Returns

This perspective hinges on an important yet often-overlooked concept that has grown increasingly relevant as today's market has become more "casino-like." This concept is time arbitrage. As more “investors” crowd into short-term trading in hopes of buying high and selling even higher, greater opportunities emerge from short-term dislocations. Heightened short-term volatility is the major culprit.

Data from the World Economic Forum and Reuters confirm this trend. Despite the extremely low likelihood of long-term profitability, trading is sweeping the markets: the average holding period for U.S. shares has plummeted from 8 years in 1960 to just 5.5 months today.

Long-term investors can and should take advantage of these market dislocations. This is where the idea of turning over rocks comes in. In times like these, investors can lean into their proven playbooks and survey the market to identify opportunities worth deploying capital into.

By performing due diligence through:

• conducting research,
• developing a thesis,
• defining your allocation target,
• and tracking your ideal entry prices,

... all that’s left is to click the “buy” button when the opportunity presents itself.

And even though a high-quality business may experience frequent sharp declines, if the intrinsic value is growing year after year, you know the listed stock price is only what Mr. Market is offering you on that particular day. As time arbitrage suggests, these moments are often among the best opportunities to acquire shares.

While others see volatility, you see opportunity.