Advice on strategy for long term investing

[Cherry]

oops!!!! You can tell I'm shorting Naspers and SABMiller. Joe Soap, in longterm investing please BUY LOW & SELL HIGH.

[Herms]

When describing yourself as a long term investor, one would have to look at Buffett as a mentor. He buys busineses which offers value. In other words great companies at discount prices. This means that even if the share for that company goes down you should still be confident that the share is undervalued. therefore no reason for stop-losses seeing as we're not traders. Remember Mr. Market is crazy!!!! Just always keep track of your investments and make sure that the fundamentals which made you buy the company in the first place didn't change. This is when you sell and admit your mistake. Even Buffett made mistakes as he easily admits. Nobody can get it right every time. But remember that the key component to remember when investing for the long term is: DON'T LET YOUR EMOTIONS INTERFERE WITH YOUR DECISIONS!!....just do your research.

[doomsdayza]

i still don't understand how "investors" cannot know how much their investment can tank before they realise they have their valuation of the business they're buying into wrong. what you are saying is that you're so happy in your valuation of this business that you're buying into, that even if it goes down to 1c you'll sleep soundly at night because it's a good business. you don't have to be a "trader" to know how much you're willing to lose on an investment and to accept the responsibility of this loss. it's called managing your risk! i'm not advocating having a 10% or whatever stop loss on a long term investment but there must come a point in time that the investment is no longer an investment. also, how long are you going to hang onto a stock which moves no more than 10% up or 10% down ad infinitum for? this is also not covered in any detail in "buy and hold" strategies. investors assume things are going to go up and sometimes i think this is assumed blindly. you probably get better long term traders than you do investors because at least the trader is prepared to sell the stock when it's overvalued. the stereotypical buy and hold guys will just ride the stock up and ride it right back down.

[doomsdayza]

http://www.thefreedictionary.com/investing and another thing, i don't see why you have to buy and hold a stock to generate a return on your capital (i.e. investing) or to be able to call yourself an "investor". biggest load of one directional / closed minded bollocks i've ever heard. if you're able to identify long term trends, UP or DOWN, and you're willing to follow those trends then you're just as much an investor as the guy who will find value in a stock and hold onto the stock through thick and thin because it has to go up sometime.

[richardw]

Actually if you're betting on the direction then you're speculating - just on a longer time scale. To my mind, backed up by what Buffett does, if you're investing then you're buying the company (not the share) and you care mostly about income, i.e. dividends. If the price drops that's great, because now you get more income for your money.

[doomsdayza]

the act of investing (capital appreciation / ROC) and how you go about doing it are two completely different things.

[john_1]

ONe question for the buffet followers out there... would we even know buffet's name if he was Japanese. Investing is a measure of capital x ( return on investment x time) its a simple formula...

[doomsdayza]

i think you have to bow down at the buffet shrine before you're allowed to call yourself an investor john. at least that's the feeling i get on this forum.

[Werner_1]

If you get better long term traders, why is nobody richer than Buffett except his friend Bill Gates (and we know where his money came from)... And if one is a proper long term investor one will not select a share that will drop to 1c, it is actually very easy to see the market leaders, dominant businesses and ones that will continue to lead in many years to come... in the US market its even easier... Coca-Cola, JPMorgan Chase, AT&T, JnJ, etc. over here there are also some excellent companies... So the idea is to buy the good companies at good prices, if one has a stoploss you not an investor and not long term as you can be stopped out anytime...

[doomsdayza]

at what point will you sell your JPM shares Werner? when it's the 108th bank to go bang? how much of a loss are you willing to take on the share? and how many times are you willing to average down? just curious to know.

[richardw]

Sadly this one's been done to death, but I'm avoiding another task so I'll have a go :)

Then all speculating is investing, surely. Capital, time, return. Short a company, get out money = investing.

[Werner_1]

I dont think you know the definition of an investor (investment) which was set out by Benjamin Graham - "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

[doomsdayza]

quoting the gospel to me now... sigh. you're confusing value investing, with normal generate a return on my capital investing. value investing 100% i agree, but please don't tell me value investing is the only way to generate returns on your capital. :/ i'm not even going to go into which method of investing is the best, but atleast concede there are other ways of generating ROC than value investing. that's all i'm trying to say.

[Werner_1]

JPM will not go bang, they were never in that situation and will not be under current management (Jamie Dimon has proven himself many times over, from building Citigroup with Sandy Weill to saving Bank One and then JPMorganChase after the merger in 2001), when i bought i calculated an excellent margin on safety and whenver the stock price reflects discount to this calculation i would acquire more. The firm's increasing market share in all its businesses, and has enormous reserves which add to the stability and market leading position... Long term it is a excellent business - one of the only banks in USA that actually came out this mess stronger and even with more respect... As for when i will cut my losses, currently that is not an option as it is not doing badly at all! and if the fundamentals of the business change, e.g. loosing its market position, and future prospects change i would reconsider, but the policies executed by management dont reflect this and over time it will prove an excellent investment...

[Werner_1]

I never said there is only one way... if you recall my posts from many months ago i always agree there are other ways...

[richardw]

Buffett's a lightning-rod for the term and is the most obvious example, so he's used a lot. Jim Rogers also calls himself an investor (not trader) but focuses on taking speculative positions that could be long or short. The lines are obviously blurred by many, as many terms are in the English language.

I'm defending the investing position because DoomDayZa essentially said the proponents were closed minded. That's playing the man, not the ball.

The roots of the terms though - invest and speculate - are pretty obviously clear. I invest time and money in my business. I invest in companies I want to own. I speculate as well - betting something will go up or down over a given time period. Sometimes it's a day or two, sometimes it's months. It could be years. I can speculate on the gold price, but I don't feel like I can invest in it.

So if the lines are blurred, then let people draw their own lines. Don't tell them their position is closed minded.

[john_1]

Absolutley...there is no diffrence...as long as your money grows...Its all a crock of ***** designed to make you pay more taxes, or pay some chop to trade for you so the asset manegers can get rich at your expence

[Werner_1]

John, to answer your question, if Buffett was Japanese we would know about his because of his enormous wealth, he in 2nd on all the rich lists, the lists that also have guys like Lakshmi Mittal, Carlos Slim these guys come from emerging markets and were identified... all excellent business people...

[doomsdayza]

it's not playing the man RichArdW... you can choose whatever method you like to grow your capital without having to be told your not an investor you're actually a speculator because you're catching an up trend. how condescending. identifying value (and waiting for an upward trend on fundamentals - coincidence? i think not) or identifying an upward trend on TA get's you to the same point in the end. this is the method which you choose to attain your ROC or the means by which you invest.

[J12]

Jo Soap. If you want my advice, I'd tell you not to ask for advice on this forum. Chances are, you'll end up more confused than you were to begin with. Do your own homework... find out what works for you, refine your methods/strategies and stick with it. I try not to look at these forums and on the odd chance that I do, I try not to let everyone else's opinions of stocks influence my researched valuation of the stock... but it's a lot more difficult than it sounds. Oh, and if you just want to know my exit strategy... when the price goes significantly higher than my fair value of the stock, I usually sell. But, that's just the way I do it... you may have a different way that works for you and that's what you have to find.