Did you know that you can profit more by doing less? Sounds good, doesn't it?
Did you know that you can profit more by doing less? Sounds good, doesn't it? Over-trading, often caused by overconfidence, simply makes you poor and your broker rich; buying for the longer term, not churning your portfolio, is a far better way to make money.
To quote, or possibly misquote, Warren Buffett: "The stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient."
He also put it a little more colourfully: "According the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic".
Don't get me wrong: If I could accurately and reliably predict short-term movements in price, I'd forget about the long term and make money from trading. But I'm not convinced that one can do that with any consistency. Which are you better at judging, the long-term weighing machine that is the market, or the short-term voting machine?
OK, I will admit to making an occasional short-term trade -- during a bid situation, for example -- but these opportunities are rare and are a minor distraction from the main business of investing.
I also recognise the importance of staying nimble. When I've made a mistake and need to get to the exit quickly, there's no point being encumbered by a 'long-termist' philosophy; 'long-term buy and hold' is a pragmatic position, not a doctrine. Conversely, nimbleness is a facility to be used with discretion.
But, sadly, this is not a slackers' charter. We still need to do the work, just not the trading. My policy is to spend considerable time and effort to find the right investments, then sit back and wait. And often this wait is longer than I would like -- there's no reason to believe the market will suddenly see sense and re-rate a share just because I bought it (although I may buy in anticipation of events that might trigger such a re-rating).
To quote the Sage of Omaha again: "We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."
Maynard Paton's Champion Shares service is designed for those with appreciate a longer term perspective, with typical intended holding periods of two to five years. Why not sign up now for a free, 30-day trial -- there's no obligation, so you have nothing to lose!
More:How To Treat Investor's Elbow | Twenty Shares For Life
