Bill Ackman's Pershing Square turned every dollar into $27 while the S&P 500 delivered just $9 over 22 years. The secret was not chasing headlines but holding quality stocks through market noise
Many investors are drawn to the idea of a shortcut to superior returns. The past two years have tested this impulse, as AI stocks and chipmakers surged while diversified portfolios lagged. However, the evidence is clear: pursuing the latest market trend has cost ordinary investors billions in missed gains and avoidable losses.
As of September 8, 2026, Pershing Square's NAV per share stood at $78.94, with a year-to-date performance of -7.1%, reflecting recent market volatility.
The cost of chasing the crowd
Despite these results, most retail investors have not matched even the market's average returns. DALBAR's 2024 analysis found that the typical equity fund investor earned just 16.54% while the S&P 500 returned 25.02%. This 8.48 percentage-point gap was the second-worst in a decade, extending a 15-year pattern of underperformance. The primary cause: poor timing-buying high, selling low, and shifting between sectors based on headlines rather than fundamentals.
In a 2025 study, Yosef Bonaparte used Google Trends to measure investor FOMO. When searches for "buy stock" and "get rich quick" increased, subsequent returns fell by up to 2%. Investors were entering after prices had already climbed, resulting in disappointment rather than profits.
In the second quarter of 2026, Pershing Square made a significant portfolio shift by fully exiting its position in Alphabet and initiating a large stake in Netflix, acquiring approximately 13.08 million shares valued at about $934 million at quarter-end.
What Ackman actually recommends
Although Pershing Square is known for bold activist positions and complex hedges-such as the $27 million credit default swap that grew to $2.6 billion in March 2020-Ackman's guidance for individual investors is notably straightforward. On the "Holy Grail of Investing" Podcast, he dismissed the idea of chasing hot sectors or timing the market. Instead, he emphasized the value of buying businesses likely to be larger and more profitable in 10, 20, or 30 years, and holding them over time.
He referenced his father-in-law, who purchased shares of companies like Philip Morris and Boeing decades ago and never sold. This approach resulted in a portfolio that compounded steadily, unaffected by market cycles or the allure of new trends.
Morningstar's 2026 "Mind the Gap" report supports this strategy. The smallest gap between fund returns and investor returns was observed among those who remained invested, resisting the urge to trade frequently. Even as access to funds and trading tools has expanded, discipline and patience remain the key advantages.
How compounding and taxes tilt the odds
Pershing Square's performance is supported by resources most retail investors do not have-activist stakes, extensive research, and the ability to deploy large sums. However, the aspect that individual investors can replicate is the discipline to hold quality businesses for the long term. Ackman notes that deferring capital gains taxes and minimizing transaction costs further enhance long-term returns. Each sale triggers taxes and fees that diminish compounding. By holding, investors allow time and tax deferral to work in their favor.
The data confirms that investors who avoid chasing trends and instead focus on durable businesses, low turnover, and tax efficiency capture a greater share of the market's real return. The S&P 500's own record demonstrates the power of compounding, but only for those who remain invested.
For those who believe the next hot sector will provide easy gains, it is notable that even major Wall Street firms now require substantial evidence before supporting new AI or tech projects, as recently reported. Hype fades, but fundamentals persist.
Who wins and who loses
Investors who follow headlines and rotate into trending sectors typically incur costs. The data shows that most miss rallies, realize losses, and underperform the benchmarks they aim to beat. In contrast, those who select strong businesses and hold through volatility benefit from compounding, lower taxes, and fewer costly errors.
As of April 2026, Pershing Square managed $33 billion across its core funds and Howard Hughes Holdings, with a staff of just 44. Its concentrated investments-such as a 10% stake in Chipotle during its food-safety crisis-produced significant returns. However, the main lesson for retail investors is not to copy specific trades, but to adopt the discipline. The advantage lies not in predicting the next winner, but in remaining steadfast amid market noise.
There is an abundance of financial products, strategies, and narratives promising outperformance. Yet the evidence is clear: successful investors are those who resist reacting to every headline and instead allow time, compounding, and tax deferral to build wealth. The real risk is not missing the next rally, but undermining returns by overreacting to market movements.
The Federal Reserve's 2025 Survey of Consumer Finances found that U.S. households held a record $46 trillion in equities, yet the median account balance remains well below what is needed for retirement security. The gap between market returns and actual investor outcomes is not just a statistic-it underscores that discipline, rather than cleverness, is the most valuable asset in personal finance.
Compounding drives long-term wealth creation, but only for those who stay invested and avoid unnecessary turnover. Each sale can trigger capital gains taxes, which may significantly reduce net returns over time. For most investors, patience, low costs, and tax efficiency offer a more reliable path to wealth than attempts to time the market or pursue the latest trend.
