Over the past two years, AI stocks and memory chipmakers delivered gains that have made diversified portfolios look sluggish. The temptation to abandon a long-term plan and rotate into whatever sector dominates headlines is hard to resist.
Bill Ackman, CEO of Pershing Square Capital Management, says that instinct is exactly the impulse that great investors must fight.
On a net basis, day-one Pershing Square investors compounded at 16.2% annually over 22 years, according to the firm’s 2025 annual report, compared with 10.7% for the S&P 500 over the same period.
That gap turned every dollar invested with Pershing Square into roughly $27, while the same dollar in the index grew to about $9.
But when the hosts asked Ackman, on the “Holy Grail of Investing” Podcast, for his single best piece of wealth-building advice, his answer was surprisingly simple.
Pershing Square’s 22-year edge over the S&P 500
Pershing Square’s 2025 annual report showed a 20.9% NAV gain for the year, compared with a 17.9% return for the S&P 500 over the same period.
Pershing Square managed about $33 billion in assets across its core funds and Howard Hughes Holdings as of April 30, 2026, according to SEC filings, and had 44 registered employees as of the end of 2025.
That record was built on tools most retail investors can’t access.
Pershing Square’s concentrated 10% stake in Chipotle during its food-safety crisis generated an IRR just under 22% and $2.4 billion in profit. The fund invested $1.2 billion before exiting in November 2025, Institutional Investor reported.
Chipotle shares returned only 16% over the period because Pershing Square had already sold 85% of its original position at higher prices.
It also included outlier hedges such as the March 2020 credit default swap trade Ackman said turned $27 million into $2.6 billion in roughly 10 days, Forbes reported.
But when asked on the podcast what everyday investors should do, Ackman didn’t point to any of it.
Why chasing the hot trade costs investors real money
DALBAR’s annual research has documented the same behavioral gap between market returns and investor returns for more than a decade. The average equity fund investor earned 16.54% in 2024, while the S&P 500 returned 25.02%.
That 8.48 percentage-point shortfall was the second-largest in a decade and extended a losing streak to 15 consecutive years of underperformance.
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“Whether through late re-entries, poor rebalancing, or tactical moves that missed rallies, the end result was the same: more effort, less return,” according to DALBAR’s Quantitative Analysis of Investor Behavior (QAIB) report, as reported by Plan Adviser.
Yosef Bonaparte, professor of finance at the University of Colorado, quantified that pattern in a 2025 study using Google Trends data for investing-related terms.
His “Global FOMO Index” tracked searches for phrases like “buy stock” and “get rich quick” to measure when crowd sentiment reaches dangerous levels.
When the index spiked, stock returns fell by 1.7% to 2% and risk-adjusted performance dropped by about 4%, the study found.
Those peaks consistently arrived after prices had already risen, meaning investors rushing in were buying near the top, Bonaparte’s research showed.
Ackman’s simplest advice for building long-term wealth
When the hosts asked what advice he would offer someone who wants to build wealth, Ackman’s answer was the opposite of the sector-chasing behavior DALBAR had just described. He called it a fear-of-missing-out (FOMO) impulse.
His alternative was to find businesses that will almost certainly be larger and more profitable in 10, 20, or 30 years, and hold them.
“Buy that company and own it,” Ackman said, calling it the “highest probability way” to build wealth over a full investing lifetime.
Jeffrey Ptak, managing director at Morningstar and lead author of the firm’s 2026 “Mind the Gap” report, told Daily Upside that his research found supporting evidence for Ackman’s view.
The report tracked the gap between fund returns and what investors earned over the decade ended December 2025.
<strong>We've seen some improvements in the way fund investors access funds and the way they put them to work. By many measures, they've become more disciplined and less prone to the sort of self-injurious trading we've seen in the past</strong>.
Ackman described his own father-in-law as proof that the strategy works, even for people who never considered themselves serious or skilled investors.
His father-in-law bought companies, including Philip Morris and Boeing, decades ago, never sold, and built a remarkable long-term portfolio, Ackman said on the podcast.
How discipline and tax deferral close the gap
Morningstar’s findings extend the point: Even with that improvement, fund investors still forfeit meaningful returns to poorly timed trades over long horizons, while investors who capture more of the market’s return tend to hold quality positions through drawdowns.
They also avoid chasing the latest hot theme, whether that is AI stocks, memory chipmakers, or whatever sector dominates the next news cycle.
Ackman said deferred capital gains taxes and lower transaction costs compounded that advantage for his father-in-law over the decades.
That combination of long holds, tax deferral, and low transaction turnover, he told the podcast, is the part of his own record a retail investor can copy without any of the concentrated activist stakes or credit hedges that produced the rest of it.
Ackman’s core point is that investors who pick durable businesses and hold them for decades let compounding, tax deferral, and low turnover do the work that frequent trading consistently destroys.
Morningstar’s data confirm that the narrowest return gaps are for investors who stay put.
