Are You A Good Long-Term Investor?

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Abstract

ng-term investor should do. If you worry about the price of your stock today, tomorrow, next quarter, or even next year, then maybe you are investing in the wrong stock. Or at least, you should not consider yourself a good long-term investor. What good long-term investors do instead, is to keep track of the business direction, their fundamentals, whether over a multi-year period the business will continue to flourish.</li></ol><h2 id="6d11">Case Study</h2><p id="858c">Looking back at the year 2021, it was a year of frenzy. Prices of meme stocks like GME and AMC started to rise crazily within a short period of time because retail investors were working together to teach the hedge funds a lesson.</p><p id="6dea">Some of you might have gotten lucky and benefited from the rise in prices of such stocks, but you better don’t consider yourself a good long-term investor because of that. In fact, don’t even bring in the word “long-term”; I don’t think you should even consider yourself a good investor because of that. You are not. You are just lucky. And no, I’m not jealous, I’m definitely not jealous!</p><p id="6df2">What a good long-term investor should be doing instead, is to focus on their investment theses (both quantitatively and qualitatively), and look at metrics like growing revenue and profits, ROIC etc.</p><h2 id="1744">Closing Remarks</h2><p id="baff">Ultimately, a good long-term investor should not judge themselves based on short-term price fluctuations.</p><p id="6941"><b>Don’t feel proud of yourself if your returns went up by 30% today, because you will have to feel dumb when your returns go down by 30% tomorrow.</b></p><p id="0fdb">Near-term

Options

price movements reflect the market sentiments at that point in time, not the business fundamentals. If you are a good long-term investor, you will know it. Most importantly, as a long-term investor, you must grow to possess zen energy, that regardless of whether the market moves up or down today, you are indifferent and unfazed.</p><p id="904d"><b>That zen personality, in my opinion, is the mark of a true long-term investor</b>.</p><p id="e63f"><i>P.S.: If you like what you are reading, or you are interested in writing an article on Medium yourself, consider supporting me and thousands of other writers <a href="https://medium.com/@TroyElite/membership"><b>by signing up for a membership</b></a>. It only costs $5 per month, and you have the chance to make money with your writing as well. By signing up <a href="https://medium.com/@TroyElite/membership"><b>with this link</b></a>, you’ll support me directly with a portion of your fee, it won’t cost you more. If you do so, thank you a million times!</i></p><div id="ca85" class="link-block"> <a href="https://medium.com/@TroyElite/membership"> <div> <div> <h2>Join Medium with my referral link — Elite Troy</h2> <div><h3>As a Medium member, a portion of your membership fee goes to writers you read, and you get full access to every story…</h3></div> <div><p>medium.com</p></div> </div> <div> <div style="background-image: url(https://miro.readmedium.com/v2/resize:fit:320/0*k5cb-LmsPYyhfdRS)"></div> </div> </div> </a> </div></article></body>

Everybody says they are a long-term investor until Mr. Market punches them in the face.

Long-term investors are known to generate higher returns compared to short-term traders.

Many people want to be associated as THE long-term investor. Feels good right? It makes you feel that you will be generating huge, outsized returns in the future.

But… among all those who consider themselves a “long-term investor”, how many of them are actually one? What makes someone a good long-term investor?

Habits

I can tell whether you are a good long-term investor based on your habits:

Do you like to celebrate short-term gains? If you do, then you are cultivating a bad habit as a self-proclaimed long-term investor. Good long-term investors do not celebrate short-term gains. Why? Because short-term price movements are not important! Without any significant changes in the business fundamentals, the price fluctuation in the short term is not a good indicator of whether you have made the right investment.

Do you check the prices of your stock daily and worry about them? Again, if you do, that’s a bad habit and not something a good long-term investor should do. If you worry about the price of your stock today, tomorrow, next quarter, or even next year, then maybe you are investing in the wrong stock. Or at least, you should not consider yourself a good long-term investor. What good long-term investors do instead, is to keep track of the business direction, their fundamentals, whether over a multi-year period the business will continue to flourish.

Case Study

Looking back at the year 2021, it was a year of frenzy. Prices of meme stocks like GME and AMC started to rise crazily within a short period of time because retail investors were working together to teach the hedge funds a lesson.

Some of you might have gotten lucky and benefited from the rise in prices of such stocks, but you better don’t consider yourself a good long-term investor because of that. In fact, don’t even bring in the word “long-term”; I don’t think you should even consider yourself a good investor because of that. You are not. You are just lucky. And no, I’m not jealous, I’m definitely not jealous!

What a good long-term investor should be doing instead, is to focus on their investment theses (both quantitatively and qualitatively), and look at metrics like growing revenue and profits, ROIC etc.

Closing Remarks

Ultimately, a good long-term investor should not judge themselves based on short-term price fluctuations.

Don’t feel proud of yourself if your returns went up by 30% today, because you will have to feel dumb when your returns go down by 30% tomorrow.

Near-term price movements reflect the market sentiments at that point in time, not the business fundamentals. If you are a good long-term investor, you will know it. Most importantly, as a long-term investor, you must grow to possess zen energy, that regardless of whether the market moves up or down today, you are indifferent and unfazed.

That zen personality, in my opinion, is the mark of a true long-term investor.

P.S.: If you like what you are reading, or you are interested in writing an article on Medium yourself, consider supporting me and thousands of other writers by signing up for a membership. It only costs $5 per month, and you have the chance to make money with your writing as well. By signing up with this link, you’ll support me directly with a portion of your fee, it won’t cost you more. If you do so, thank you a million times!