5 Lessons to Learn from Long Term Investors
Being in the stock market field one question that you always heard or you may have asked it to someone “HOW LONG IS LONG-TERM?”- Right?
If you ask someone who is successfully investing in the stocks for a long time or have witnessed several market cycle would say that long term is infinite, and for him, long term investment time period never ends.
This is because a serious long term investor would want to hold on to his/her investment forever. Because for him it’s more about attitude than a number. And this is the first lesson one has to learn if he/she wants to create wealth through long term investing.
So the question arises what long term investors do differently than average investors? Here are five lessons to learn from long term investors and at the same time you would also learn why long term investment is good.
1st, long term investors take time to understand what they are doing and why (or) we can say that they spend more time with their research before taking any call/decision.
In our society we find many people who invest through an IPO; there could be many reasons behind this (1) either they have heard about IPO via any news channels, or (2) their broker recommend it, or (3) a friend, colleague, or a relative suggest it, or (4) they have made some money by buying IPOs earlier and still holding that stock. But let me tell you they are not long-term investors.
If there is no method for selecting investments, they are not long-term investors. Such individuals would always want to all about their investment. As said earlier, they spend time and effort on learning about the company, management, and its products/services etc… In short, they believe in research and analysis.
It is said that if one pick the right business (company) and right management at the right price (of course through deep research) they can create huge wealth for themselves.
2nd, long term investors are realistic in their approach when it comes to return on investments and they do not expect miracles to happen overnight.
Serious long-term investors know that there is no certain formula for picking winning stocks (of course right business and right management at the right price are helpful) and they are happy with average returns and also keep return expectation normal.
If they able to manage 15% CAGR in the long run, they have successfully beaten inflation rate (which is 4% to 7% on an average in India) and earned more than what the bank FDs would produce (which is 7% to 8% in India) and still create a tremendous amount of wealth.
Here is a list of returns (CAGR) some of the world’ greatest investors have generated over long periods of time –
3rd, long term investors accept economic (investment) cycles as reality.
They always know that a growing economy (like BRICS nations, India and China in particular) will create a large number of enthusiasts, who will set up, expand, grow, and showcase their businesses as investment opportunities. The precisely know that a cycle of huge demand will take the stock price up and the business could make profits.
Long term investors are also called smart investors since they hold the key to sense this optimism would become irrational when bad quality stocks get money and average investors rush to buy junk stocks. In other words, we can say that when penny stocks tend to make headline long-term investors quickly feel that the market is overdone and they exit the market.
In short, they sincerely apply the Warren Buffett philosophy “be fearful when others are greedy and be greedy when others are fearful”
4th, long term investors acknowledge their mistakes and make improvements.
This is one of the most important lessons one needs to learn if he/she wants to be successful in the stock market game.
Do keep in mind that stock market is one of the easiest fields to get in but to achieve success and create wealth you need to spend time for thorough research and importantly accept the mistakes even though you’ve done tremendous research and hard work to find a good business.
Long term investors keep tracking their investment and anticipating a growth over a longer period of time and if something doesn’t work well in between they hold the courage accept the mistakes and take action when the big picture seems to be changing.
5th, they accept investing as passion and don’t think of getting overnight success.
Long term investors are more fundamentally grounded. They are well aware of the fact that there are several other players in the market who express their views on the stocks and don’t see price fluctuation as a selling opportunity to make a quick gain.
Most importantly they do not make decisions based on tips, tricks, and thumb rules. Rather, they see investing as a passion, apply their own strategies and decide the proportion to invest, constantly monitor and manage how the portfolio is doing. This is the reason why finding long term investment bet is tough.
These are some the lessons that help you stand out from the others and able to generate sizeable wealth (of course over a longer period of time)
Also Read –
Finblab’s Value Pick Stock for the month of March 2019 – Kirloskar Brothers Limited
Disclaimer: The contents and data presented here are just for your information & personal use only. While much effort is made to provide the information, I ( Vishal Dalwadi ) or “FinBlab” do not guarantee the accuracy, correctness, completeness or reliability of any information or data displayed herein and shall not be held responsible.
