Much ink has been spilt about the great benefits of investing in the stock market. We constantly read about the power of compounding, how investing in stocks can help you beat inflation and the beauty of passive income from dividends.

But there’s a flip side to all this. Stock prices will fall every so often.

The size of the drawdowns can be big and they can happen frequently. It’s inevitable and will always be part and parcel of the stock market.

That’s what makes long term investing so hard

Fundsmith is the UK’s largest fund by assets under management and also one of the country’s top-performing funds. Its annualised return since inception (from November 2010 to May 2020) is 18.2%, compared to the MSCI World Index’s gain of 11.2% per year.

Its investment philosophy is summed up by three simple but profound investing principles: (1) Buy good companies, (2) Don’t overpay, and (3) Do nothing.