Long-term investing is an investment strategy where a position is taken in a stock, a market, a currency, or a commodity and is not sold for at least a few years. Proponents of long-term investing believe this buy-and-hold pattern will pay off in the long run.
The danger with long-term investing is staying with a position that continues to lose money. The most important aspect of long-term investing is to evaluate the investment thesis constantly. Things change. If the change alters the investment thesis, then an investor needs to sell and move on. If the thesis still works, then the difficult part is staying with a losing position until the market turns and proves the thesis right.
The stock market staged a minor rally last week, but don’t get too excited yet; the buying support was largely triggered by a technically oversold market, rather than solid fundamentals or a fresh catalyst. What I can say is that investors need to be careful with the high-beta stocks that are extremely volatile at this time and vulnerable to downside selling. Just because momentum surfaces, it doesn’t mean the risk is dissipating. It’s simply an oversold bounce that could continue or falter again. The fact that the Dow Jones Industrial Average and S&P 500 recovered their ... Read More
The chase for high-beta stocks appears to be fading at this juncture, as we are seeing a shift in the risk profile to lower-beta and more conservative large-cap stocks in the stock market. After the staggering gains made by technology and small-cap stocks in 2013, it’s time to take a prudent approach to the stock market and refrain from chasing risk at this time. We are seeing a move to consumer staples stocks that tend to fare reasonably well in both up and down stock markets. While I favor small-cap stocks in an up stock market, the current tension in the stock market ... Read More
The tension in the stock market is clearly evident, especially with the NASDAQ and Russell 2000 breaching their respective 50-day moving average (MA). What we have seen in the stock market is a shift away from higher-beta growth and small-cap stocks to the perceived safety of blue chips and large-cap stocks, which I recently wrote about. Driving much of the current malaise in the stock market has been the selling in the technology groups, specifically the high-momentum stocks that attracted major buying euphoria in 2013, in spite of what were high valuations and overdone optimism. While I continue to like technology for growth inve ... Read More
I’m starting to receive more questions regarding the state of the stock market and whether it’s simply a bout of profit-taking or the set-up of a deeper stock market correction. First of all, panicking is not what you want to do. Yes, we are seeing some selling surfacing, but that doesn’t necessarily mean you should go and dump stocks. After the year we had in 2013 and the fact that the bull stock market is in its fifth year and devoid of a major question despite the advance, it would not be a surprise to see some selling. Also, with bond yields beginning to rise, we will see a reduction in the assumed risk and will likely se ... Read More
We all know the importance of the railroad in linking the nation from coast to coast in its early beginnings. Railways allow for the transportation of people and goods across an expansive territory; but for businesses, it’s even more vital as an avenue to ship goods, such as oil, chemicals, and other commodities. While the North American rail system is massive, the real major growth in this area right now—and looking forward—is the colossal build-up that’s taking place across China. I’m talking about tens of thousands of miles of rail, and it’s expanding deeper into rural areas. The use of high-speed rail, especially, is ga ... Read More
With a long-term portfolio, the goal is to earn a constant rate of return over a long period. Sadly, even with this in mind, investors end up making decisions that jeopardize their long-term objectives. They make mistakes, but luckily, the effects of these mistakes can be easily controlled, saving their portfolio from disaster—it all comes down to these three principles of smart long-term investing that every investor needs to know when building their long-term portfolio. When There’s Rising Optimism, Go into Protective Mode Too ... Read More
One of the most hotly debated topics these days is the role of activist investors. Some people have the impression that an activist investor is not a positive factor when it comes to long-term investing. I disagree, as many times, the investment strategy recommended by these activist investors ends up benefiting all shareholders. Probably the most well-known, and certainly the wealthiest, activist investor is Carl Icahn. One of the things I like most about Icahn’s investment strategy is that he is willing to buy when others are selling and be vocal about his intentions. A pe ... Read More