In year 6 of a bull market, it has become clear that performance chasing is very much in vogue. We’ve taken a number of calls from individuals who’ve been thrilled at their ability to profit in positions by holding them for a few days or weeks. In addition, performance tracking on a monthly or even daily basis has become more common. The key to investing successfully is understanding the behaviors that prevent long-term investing success. Short-term performance chasing and being scared of volatility are the two most common causes of investment failure. This is why people got burned when the Nasdaq crashed in 2000 and why the Nifty Fifty devastated investors’ portfolios in the 1960s. Being scared of volatility is what kept people out of much of this bull market when the returns were the best, only to get in at these later stages when prices are once again expensive. Once you’ve identified a solid investment manager and investment, your best bet is to look at your statements yearly and to truly take a 3-5 year perspective at the minimum. Investing is about buying fractional shares of a business at a discount to intrinsic value without certainty as to when the undervaluation will correct itself. Good businesses compound in value over the years creating stellar returns.
Below is an article of a low income individual that saved a fortune through a combination of being frugal and patient with his investments. He didn’t switch from fund to fund and he didn’t engage in day trading. When Charlie Munger says that the “big money is made in the waiting” he is 100% accurate. Energy companies are a perfect example. Virtually nobody predicted oil would drop like it has and the stocks have been hammered as a result. This has caused the amount of rigs drilling for oil to be cut in half in North America, and will ultimately results in demand going up and prices going higher. However, over the short-term there is excess supply in inventories in North America. This has a lot to do with refinery maintenance and archaic U.S. laws that ban the exportation of crude oil. The day to day fluctuations in price drive volatility but will have little impact on the long-term value of the businesses that we invest in. Imagine if this gentleman in the article below sold his stocks during every industry slowdown. The market constantly overreacts, which is what as patient and disciplined value investors, we capitalize on. If you are looking to double your money in 3-5 years with a lower risk profile, you must buy businesses at discounts to what they are worth. You aren’t going to find that right now in glamor sectors such as healthcare or technology, but you can find those opportunities in financials and energy. I hope that you enjoy the article. Please feel free to contact me if you have any questions whatsoever 805-886-8140.