Successful Investing Requires a Long-Term Approach
August 6, 2021
Investors are advised to take a long-term approach to investing writes Peter Watson.
Patience, patience, patience. That is a key to successful investing.
Over the years I have heard many stories of people making investment decisions that ended up to be very damaging to their investment returns. In hindsight, their decision to buy or sell was a mistake.
This applies to trading individual stocks and also mutual funds that owns a large number of stocks.
The stories come from investors, financial advisors, and investment managers.
My belief, based on what I have seen and what is shown in academic research, is that it is impossible to accurately and consistently predict the stock market on a short-term basis. That would lead you to the conclusion that it is more profitable to be a long-term investor than a short-term speculator.
How can short-term speculative investment decisions always work out in your favour? For every buy or sell decision you make there is someone on the opposite side of the trade that believes differently than you.
You think a stock will go down. You sell. The purchaser believes the stock will go up in value and that’s why they purchased the stock.
I am clearly on the side of those that believe in long-term investing. Owning a well-diversified stock portfolio for the long-term has been an extremely successful investment strategy.
Others strongly oppose this approach and that’s what makes the investing world so interesting.
A long-term strategy of investing will go through natural stages of underperforming and over performing other investment alternatives. That is natural and should be expected.
In investment language there is a term “regression to the mean”. Translating this it means that over time numbers will average out.
Granted there will be swings both positive and negative but repeating, over time numbers will average out.
My recommendation: invest for the long-term.
Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Watson Investments.