The best investors have a process. Masters of the Market: featuring Alex Green

0.00  Intro

2.14  What did you learn from your career

6.54  Investing is a long game

9.41  The best investors have a process

12.45 Smart money in hedge funds

14.18 Is Wall Street trustworthy

18,13  How to deal with fear

23.30  How to pick stocks

28.39  How to judge management

30.14  How to build a portfolio

34.02  Do dividends matter

37.05  What are we missing

39.13  Option oriented ETFs

41.40  Trends investors are overlooked

48.15  Small Cap Stocks

51.29  Biggest Mistakes

56.14  My Biggest Mistake

57.54  Top 3 Positions

Investors can think long-term but managers are a harder case

Research shows executives are tempted take short-cuts to hit quarterly numbers
WEI JIANG

Are our markets really too focused on immediate results at the expense of long-term growth?
Wei Jiang JULY 25 2019


Charges of short-termism have been aimed at financial markets and companies for decades, but concerns have intensified recently. Now US regulators are asking whether rule changes are needed to address the issue.

But are our markets really too focused on immediate results at the expense of long-term growth? As an academic finance professor, I believe we can rely on empirical research on how the market values highly innovative companies. Innovation, after all, is the ultimate proof that companies are investing for the long haul.

First, let’s look at whether companies are discouraged from risky investments aimed at ambitious discoveries or from deploying unconventional methods. A 2013 study found that highly innovative companies — as identified by high levels of research and development spending — are fairly priced, rather than heavily discounted as “market short-termism” would predict. Their future stock returns are comparable with those earned by other companies in the same class.

In fact, the study found that many high R&D companies with lower past success — as reflected in their ability to convert R&D spending future sales growth — are, if anything, overvalued for an extended period of time. That suggests public market investors are rather tolerant of failure.

We must consider, too, the impact of hedge fund activists, who often seek payouts through share buybacks. Critics say that these reduce the value of the companies in the long run by leading to reduced investment in innovation. But not all R&D spending is created equal. A study that three co-authors and I published last year found that while corporate spending on R&D does tend to fall in the year following interventions by shareholder activists, the R&D spending that remains becomes more productive.

At such companies, the number of new patents increased by 15 per cent, three to five years after the activists’ intervention, and the number of citations per patent — an indicator of patent impact or quality — also rose by 15 per cent. That suggests increased R&D efficiency and additional innovation.

Some investors, then, are more than willing to take the long view. But what about corporate managers? Evidence suggests that executive shortsightedness is not only a possibility, but can be a likely outcome in today’s markets.

Here’s why: most businesses are at risk of “stakeholder runs.” Creditors, suppliers and employees may seek to flee at the first sign of trouble, so the perception — possibly distinguished from the reality — of financial health is vital. Hence managers will often take actions that favour current observable results — think earnings here — to convince (or in some cases mislead) the market about a company’s fundamental health.

Investors are typically not fooled: they understand the incentives for managers to set and then beat earnings targets, and they correctly suspect that there will be “short-termist” efforts to meet those targets — stuffing inventories into the supply chain or cutting productive R&D if necessary.

Once it becomes clear managers are willing to play the earnings “game”, investors adjust when pricing the stock. For such companies, missing forecasts by small amounts can trigger a big sell-off because investors expect executives to exhaust all possible resources to meet their targets. Companies can short-circuit this unproductive cycle by avoiding quarterly earnings guidelines and a number of them have done so. This allows them to focus on other measures of performance, such as R&D spending and patent filing.

While short-termism can be a problem for our financial markets, the long-term is, of course, nothing more than a continuous series of short-terms. Investors can make it easier for companies to arrive at the right long-term mark by encouraging them to pick intermediate goals that keep them on the right path.

The writer is a Columbia Business School professor of finance



https://www.ft.com/content/3249bce4-ac8c-11e9-b3e2-4fdf846f48f5

It is important to have a long-term investment horizon when getting started in stocks.

Time is on Your Side

Just as compound interest can dramatically grow your wealth over time, the longer you invest in stocks, the better off you will be.

With time,

• your chances of making money increases, and 
• the volatility of your returns decreases.

The Longer you invest, the Lower the Volatility of your Returns

The average annual return for the S&P 500 stock index for a single year has ranged from -39% to +61%, while averaging 13.2%.

After holding stocks for 5 years, average annualised returns have ranged from -4% to +30%, while averaging 11.9%.

If your holding period is 20 years, you never lost money, with 20-year returns ranging from +6.4% to +15%, with the average being 9.5%.


These returns easily surpass those you can get from any of the other major types of investments.




The Importance of having a Long-term Investment Horizon in Stocks

Again, as your holding period increases,

• the expected return variation decreases, and 
• the likelihood for a positive return increases.  

This is why it is important to have a long-term investment horizon when getting started in stocks.





Summary


While stocks make an attractive investment in the long run, stock returns are not guaranteed and tend to be volatile in the short term.


We do not recommend that you invest in stocks to achieve your short-term goals.


To be effective, you should invest in stocks only to meet long-term objectives that are at least 5 years away.


The longer you invest, the greater your chances of achieving the types of returns that make investing in stocks worthwhile.




Additional notes:

Though stocks typically perform best over the long term, there can be extended periods of poor performance.  

For example, the DJIA peaked in 1966 and didn't surpass its old high again until 16 years later in 1982.  But the following 20 years were great for stocks, with the Dow increasing more than tenfold (10x) by 2002.

Secrets of Long-Term Investing Revealed

“........... long-term investing isn’t about having a great system, or a superior analytic intellect, or better access to information, or even the best advice money can buy.  Long-term investing is about character, about depth of vision and the cultivation of patience, about who you are and who you’ve made yourself to be”

The Single Best Investment, page 149

What is long-term investing? 

Long-term investing is the process of buying and holding investment securities you believe will compound investor wealth indefinitely into the future.

Why You Need to Become a Long-Term Investor

There are 3 good reasons to become a long-term investor:

1. It reduces fees
2. It requires less of your time
3. It is highly effective

Long-term investing is so successful is because of its beneficial psychological ramifications.  

If you invest for the long-term, you will focus on businesses with strong and durable competitive advantages that have a chance of compounding your wealth for decades, not days.

Long-Term Investing Strategy

The strategy long-term investors follow is straight-forward:

• Identify companies with durable competitive advantages
• Be sure these companies are in slow changing industries
• Invest in these companies when trading at fair or better prices

Three favorite slow changing industries are:

• Insurance
• Health care
• Food and beverage

To find if a company is trading at ‘fair or better prices’, a few metrics are important.

• If the company is trading below the market price-to-earnings ratio, its peer’s price-to-earnings ratio, and its 10 year historical average price-to-earnings ratio, it is likely undervalued.  
• These 3 relative price-to-earnings ratios will help to paint a picture of if a stock is ‘in favor’ or ‘out of favor’.  

As a general rule, it’s best to buy great businesses at a discount – when they are out of favor.

Another good metric to look at for determining value is a company’s expected payback period.

• Payback period is calculated using an expected growth rate and a stock’s current dividend yield.  
• The higher the dividend yield and expected growth rate, the lower the payback period.  
• The payback period is the number of years it will take an investment to pay you back.  
• Obviously, the lower the payback period, the better.

Long-Term Investing Examples

Warren Buffett’s investment history is perhaps the best example of long-term investments.  Three of his longest running investments are below:

• Wells Fargo (WFC) – 25% of his portfolio – First purchased in 1989
• Coca-Cola (KO) – 15% of portfolio – First purchased in 1988
• American Express (AXP) – 11% of portfolio – First purchased in 1964

All of these three investments are 25 years old or older.

The American Express investment is especially impressive.  Warren Buffett has held American Express for over 50 years!

Stocks for Long-Term Investors

• Find high quality dividend growth stocks suitable for long-term investors.
• Identify high quality dividend growth stocks trading at fair or better prices.
• Have a brief list of blue-chip stocks worthy of long-term investors that are currently trading at fair or better prices.

For example:  One for each sector of the economy is shown:

• Basic Materials: Phillips 66 (PSX)
• Consumer Goods: General Mills (GIS)
• Financial: Aflac (AFL)
• Health Care: Johnson & Johnson (JNJ)
• Industrial Goods: Deere & Company (DE)
• Service: W.W. Grainger (GWW)
• Technologies: Verizon Wireless (VZ)
• Utilities: Southern Company (SO)

Long-Term Investing Is Difficult

Long-term investing is not easy.

It is psychologically difficult to hold a stock when its price is declining.

Holding through price declines takes real conviction (remember the marriage analogy?).

The nearly infinite liquidity of the stock market combined with the ease of trading makes selling stocks something you can do on a whim.

But just because you can, doesn’t mean you should.

The constant stream of stock ticker price movements also coerces individual investors into trading unnecessarily.

• Does it really matter that a stock is up 1% today, or down 0.3% this hour?  
• Have the long-term prospects of the business really changed?  

Probably not.

To compound these problems even further, the financial media promotes rapid action.

• To garner views and attention, financial pundits have become LOUD.  
• They are always promoting the next great stock to buy, or which one MUST be sold.

The Cure:  Watch Dividends, Not Stock Prices

Stock prices lie.

• They signal a business is in steep decline, when it isn’t.  
• They say a company is worth 3x as much as it was 3 years ago, when the underlying business has only grown 50%.  
• Stock prices only represent the perception of other investors.  
• They do not and cannot show the real total returns an investment will generate.

Instead of watching stock price, avoid them completely.

Look at dividend income instead.

• Dividend do not lie.  
• A business simply cannot pay rising dividends for any protracted period of time without the underlying business growing as well.

Dividends are much less volatile than stock prices.

• Dividends reflect the real earnings power of the business.  
• As a result, it makes sense to track dividend income rather than stock price movement.  
• After all, don’t you care what your investment pays you more than what people think about your investment?

The Difference Between Buy & Hold and Long-Term Investing

There is a difference between buy and hold (sometimes called buy and pray) investing and long-term investing.

Buy and hold investing typically means buying and holding no matter what.

That’s not what long-term investing is about.

Sometimes, there is a very good reason to sell a stock.  It just happens much less frequently than most people believe.

Two reasons to sell a stock:

1. If it cuts or eliminates its dividend payments
2. If it becomes extremely overvalued

The first reason to sell is intuitive.

• When a stock cuts its dividend, it violates your reason for investing. 

The second reason to sell is in the case of an extreme overvaluation.

• I’m not talking about when a stock moves from a price-to-earnings ratio of 15 to 25.  
• I’m talking about when a stock is trading for a ridiculous price-to-earnings ratio; something like 40+.  
• An important caveat to remember is to always use adjusted earnings for this calculation.  
• If a cyclical stock’s earnings temporarily fall from $5.00 per share to $1.00 per share, and the price-to-earnings ratio jumps from 15 to 75, don’t sell.  
• In this instance, the price-to-earnings ratio is artificially inflated because it is not reflecting the true earnings power of the business.  

Selling due to extreme valuations should only occur very rarely, during extreme bouts of irrational market exuberance.

Final Thoughts

Investing for the long run is simple, but not easy.

It is psychologically difficult.

The amazing success records of investors who believe a long-term outlook is critical for favorable investment returns lends credibility to the idea of long-term investing.

The financial media does not typically discuss the merits of long-term investing because it does not generate fees for the financial industry, and it does not lend itself to flashy headlines or catchy sound bites.

Invest in high quality dividend growth stocks for the long-run.

• High quality dividend growths stocks with strong competitive advantages offer individual investors the best available mix of current income, growth, and stability as compared to other investment strategies and styles.

Long-term investing requires conviction, perseverance, and the ability to do nothing when others are being very active with their portfolios.

Do you have what it takes to invest for the long run?

Read:
http://www.smarteranalyst.com/2015/11/16/secrets-of-long-term-investing-revealed/

http://www.amazon.com/The-Single-Best-Investment-Creating/dp/0965175081/ref=cm_cr_pr_product_top?ie=UTF8  (Click on the book to get a sample of the pages within.)

This is a very good thing.

Keeping a long-term perspective will continue to be the key to success.

As long as you have picked a long-term strategy that makes sense and you believe in.

Intrinsic value of Great Businesses: What's the business actually worth? Think long-term.

Company OPX

52 week high:  $52.99  (April 2010)  Market cap $960 million
52 week low:  $33.33 (July 2010)  Market cap $ 625 million
Variance:  35.2%


1.  Is the market really suggesting that this business was worth $960 million in April 2010, but only $625 million the following July?

2.  Yes, this is exactly what the market is suggesting.

3.  What's the business actually worth?

4.  Because it ought to be obvious that a fast-growing company cannot be worth $625 million and $960 million at roughly the same time.  

5.  Our goal as investor is to buy $960 million businesses when the market's charging $625 million.
6.  If you think these things don't happen, be assured:  They happen all the time.

7.  It is even better when we can buy a $500 million business for $300 million and watch the company grow into a $3 billion business.  

8.  It is this effect - the fact that great businesses make themselves more valuable over time - that keeps us from selling a $500 million business when its market cap increases to $600 million.

9.  After all, the $500 million valuation is based on our own analysis, and mathematically speaking, it's our single point of highest confidence in a range of values we believe the company could be worth.

10.  It might be substantially more.  

11.  If you're disciplined enough to only buy companies when they are priced at the low end of your range of potential values, your returns over time are almost guaranteed to satisfy.

12.  Holding a company when it's in the higher end of your range of values leaves you somewhat susceptible to a stock drop, given the lower margin of safety.  

13.  But if you have properly identified the company as a superior generator of wealth, the biggest mistake you might ever make is selling it because its shares are a few dollars too high.

14.  If you bough company OPX back in December 1987, for example, your shares rose 75%, from $23 to $40 in about two months.

15.  That's great return - but over the next 20 years, the stock has risen another seven times in value - tax free.

16.  Ultimately, it is nearly impossible to manage superior long-term results by focusing on short-term aims.

17.  Company OPX has evolved from a regional small cap into one of the most important retailers in the world, generating spectacular returns for shareholders in the process.

Philip Fisher: Why staying long-term in your investments makes a lot of sense.

Why staying long-term makes a lot of sense?    


Quoting Phillip Fisher:

1.  It is just appalling the nerve strain people put themselves under trying to buy something today and sell it tomorrow.  2.  It's a small-win proposition. 3.  If you are a truly long-range investor, of which I am practically a vanishing breed, the profits are so tremendously greater. 

1.  Someone made a remark that, while it is factually correct, is completely unrealistic when he said, "Nobody ever went broke taking a profit."   2.  Well, it is true that you don't go broke taking a profit, but that ASSUMES you will make a profit on EVERYTHING you do.  3.  It doesn't allow for the mistakes you're bound to make in the investment business.

1.  Funny thing is, I know plenty of guys who consider themselves to be long-term investors but who are still perfectly happy to trade in and out and back into their favourite stocks.  2.  Then when their stock got up to a higher price, the pressure to sell got so strong.  3.  "Well, why don't we sell half of it, so as to get our bait back?"  4.  That is a totally ridiculous argument.  5.  Either this is a better investment than another one or a worse one.  6.  Getting your bait back is just a question of psychological comfort.  7.  It doesn't have anything to do with whether it is the right move or not. 

Warren Buffett - The Long Term Investor

"All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies."  Warren Buffett

Patience and pricing are once again your main allies.

Warren Buffett bought into Coca Cola when its share price was at one of its lowest points, well below the average, and still holds the stock to this day.

Investing for the Long Run - An approach

Investment objectives.

1.  I am looking at a 10 year time horizon in this investment.

2.  My objective is to grow my initial capital 400% in 10 years, that is, doubling at the 5th year and quadrupling at the 10th year.

3.  The sum invested will be a big sum of meaningful amount (a fat pitch).

What stock to buy?

1.  Good quality growth stock, with durable competitive advantage and economic moat.

2.  Revenue and earnings growing at >15% per year, that are predictable and sustainable.

3.  ROE > 15% per year.

4.  FCF +++

5.  Good management with integrity

When to buy?

1.  When the stock price is compelling, that is, undervalued.

2.  A low buying price translates into higher returns on the invested amount.

Investing for the Long Run

Introduction
The difference of only a few percentage points in investment returns 
or interest rates can have a huge impact on your future wealth. 
Therefore, in the long run, the rewards of investing in stocks can 
outweigh the risks. We'll examine this risk/reward dynamic in this 
lesson.

Volatility of Single Stocks
Individual stocks tend to have highly volatile prices, and the returns
you might receive on any single stock may vary wildly. If you invest
in the right stock, you could make bundles of money. For instance,
Eaton Vance EV, an investment-management company, has had the
best-performing stock for the last 25 years. If you had invested
$10,000 in 1979 in Eaton Vance, assuming you had reinvested all
dividends, your investment would have been worth $10.6 million by
December 2004.

On the downside, since the returns on stock investments are not
guaranteed, you risk losing everything on any given investment.
There are hundreds of recent examples of dot-com investments that
went bankrupt or are trading for a fraction of their former highs.
Even established, well-known companies such as Enron, WorldCom,
and Kmart filed for bankruptcy, and investors in these companies
lost everything.

Between these two extremes is the daily, weekly, monthly, and
yearly fluctuation of any given company's stock price. Most stocks
won't double in the coming year, nor will many go to zero. But do
consider that the average difference between the yearly high and
low stock prices of the typical stock on the New York Stock
Exchange is nearly 40%.

In addition to being volatile, there is the risk that a single company's
stock price may not increase significantly over time. In 1965, you
could have purchased General Motors GM stock for $50 per share
(split adjusted). In the following decades, though, this investment
has only spun its wheels. By June 2008, your shares of General
Motors would be worth only about $18 each. Though dividends


would have provided some ease to the pain, General Motors' return
has been terrible. You would have been better off if you had
invested your money in a bank savings account instead of General
Motors stock.

Clearly, if you put all of your eggs in a single basket, sometimes that
basket may fail, breaking all the eggs. Other times, that basket will
hold the equivalent of a winning lottery ticket.

Volatility of the Stock Market
One way of reducing the risk of investing in individual stocks is by
holding a larger number of stocks in a portfolio. However, even a
portfolio of stocks containing a wide variety of companies can
fluctuate wildly. You may experience large losses over short periods.
Market dips, sometimes significant, are simply part of investing in
stocks.

For example, consider the Dow Jones Industrials Index, a basket of
30 of the most popular, and some of the best, companies in America.
If during the last 100 years you had held an investment tracking the
Dow, there would have been 10 different occasions when that
investment would have lost 40% or more of its value.

The yearly returns in the stock market also fluctuate dramatically.
The highest one-year rate of return of 67% occurred in 1933, while
the lowest one-year rate of return of negative 53% occurred in 1931.
It should be obvious by now that stocks are volatile, and there is a
significant risk if you cannot ride out market losses in the short
term. But don't worry; there is a bright side to this story.


Over the Long Term, Stocks Are Best
Despite all the short-term risks and volatility, stocks as a group have
had the highest long-term returns of any investment type. This is an
incredibly important fact! When the stock market has crashed, the
market has always rebounded and gone on to new highs. Stocks have
outperformed bonds on a total real return (after inflation) basis, on
average. This holds true even after market peaks.

If you had deplorable timing and invested $100 into the stock market
during any of the seven major market peaks in the 20th century,
that investment, over the next 10 years, would have been worth
$125 after inflation, but it would have been worth only $107 had you
invested in bonds, and $99 if you had purchased government
Treasury bills. In other words, stocks have been the best-performing
asset class over the long term, while government bonds, in these
cases, merely kept up with inflation.

This is the whole reason to go through the effort of investing in
stocks. Again, even if you had invested in stocks at the highest peak
in the market, your total after-inflation returns after 10 years would
have been higher for stocks than either bonds or cash. Had you
invested a little at a time, not just when stocks were expensive but
also when they were cheap, your returns would have been much
greater.


Time Is on Your Side
Just as compound interest can dramatically grow your wealth over
time, the longer you invest in stocks, the better off you will be.
With time, your chances of making money increase, and the volatility
of your returns decreases.

The average annual return for the S&P 500 stock index for a single
year has ranged from negative 39% to positive 61%, while averaging
13.2%. After holding stocks for five years, average annualized returns
have ranged from negative 4% to positive 30%, while averaging 11.9%.
These returns easily surpass those you can get from any of the other
major types of investments. Again, as your holding period increases,
the expected return variation decreases, and the likelihood for a
positive return increases. This is why it is important to have a long term
investment horizon when getting started in stocks.


Why Stocks Perform the Best
While historical results certainly offer insight into the types of
returns to expect in the future, it is still important to ask the
following questions: Why, exactly, have stocks been the best
performing asset class? And why should we expect those types of
returns to continue? In other words, why should we expect history
to repeat?


Quite simply, stocks allow investors to own companies that have the
ability to create enormous economic value. Stock investors have full
exposure to this upside. For instance, in 1985, would you have
rather lent Microsoft money at a 6% interest rate, or would you have
rather been an owner, seeing the value of your investment grow
several-hundred fold?

Because of the risk, stock investors also require the largest return
compared with other types of investors before they will give their
money to companies to grow their businesses. More often than not,
companies are able to generate enough value to cover this return
demanded by their owners.


Meanwhile, bond investors do not reap the benefit of economic
expansion to nearly as large a degree. When you buy a bond, the
interest rate on the original investment will never increase. Your
theoretical loan to Microsoft yielding 6% would have never yielded
more than 6%, no matter how well the company did. Being an owner
certainly exposes you to greater risk and volatility, but the sky is also
the limit on the potential return.


The Bottom Line
While stocks make an attractive investment in the long run, stock
returns are not guaranteed and tend to be volatile in the short term.
Therefore, we do not recommend that you invest in stocks to
achieve your short-term goals. To be effective, you should invest in
stocks only to meet long-term objectives that are at least five years
away. And the longer you invest, the greater your chances of
achieving the types of returns that make investing in stocks
worthwhile.

Quiz 
There is only one correct answer to each question.
1 The average yearly difference between the high and low of the
typical stock is between:
a. 30% and 50%.
b. 10% and 30%.
c. 50% and 70%.

2 If you were saving to buy a car in three years, what percentage of
your savings for the car should you invest in the stock market?
a. 50%.
b. 70%.
c. 0%.

3 If you were investing for your retirement, which is more than 10
years away, based on historical returns in the 20th century, what
percentage of the time would you have been better off by
investing only in stocks versus a combination of stocks, bonds,
and cash?
a. 50%.
b. 100%.
c. 0%.

4 Well known stocks like General Motors:
a. Always outperform the stock market.
b. Are too highly priced for the average investor.
c. Can underperform the stock market.

5 Which of the following is true?
a. After adjusting for inflation, bonds outperform stocks.
b. When you invest in stocks, you will earn 12% interest on your
money.
c. Stock investments should be part of your long-term
investment portfolio.



http://news.morningstar.com/classroom2/course.asp?docId=142859&page=1&CN=COM

Why is investing confusing?

What is the Right Way? Delay gratification. Think long term. There are no short cuts in life.

The Average Investor Is Better Off Trading Long-Term

By Arthur, The Stock Investor Home
Investor are often reminded by the stockmarket that their shares value can go up (the bull) as well as down (the bear).  That is why people who tried to time the market can never beat it.  It is also the number one reason why people who tried to time the market will only end up losing money again and again.
 
One of the best time study was to "sell in May" and keep away from the market.  This is a method which was once used by traders and coined by the Hirch organization who publish the Stock Traders Almanac.  What they published was a fascinating stat that says that since 1950, if you invested $10,000 in the market at the beginning of November and held it to April of every year, you would have $536,000 currently. If you had done the same thing but invested from May to October, you would actually have a loss of $236.  You might want to give this time study investing method a tried but at your own risk.
 
Study have shown that for the average investor who have a full-time job on hand, they are better off investing for the long-term and ignore the short-term volatility of the share market.  Remember, short-term volatility is only importance to short-term investor.  As long you as you keep your long-term financial goal in mind and average the number of shares in good and bad time, the average long-term investor are going to perform much better than any short-term trader.
 
The secrets to consistently outperform any stock market indices no matter where you lived is very simple.  Since 1925, common stocks have generated an average annual rate of return of around 9-10 percent versus 3-5 percent for government bonds.  In addition, stocks have been one of the only investments that have consistently outpaced inflation over time.
 
Time is the best way to ride out any volatility.  Time have repeatedly show you that the stock market share value will recover and your share prices will once rise again.  That is why Warren Buffett favourite holding period for stock is FOREVER.  To benefits from the test of time, you must select your company stock carefully for investment.  Go for large companies such as Coca-Cola which you know that it will be around for many centuries.  Diversify your stock investment to not more than 10 companies.  Diversification works only if your don't OVER diversify.
 
No one in the stock investment world can consistently out-perform or beat the market.  Successful investor DO NOT tried to beat the market.  What they do is to keep their long-term financial goal in mind and invest using Fixed Cost Averaging, Time Diversification, and Investment Fund Diversification in Large Companies listed on stock exchange.
 
Don't bother to listen to any financial news, all they do is to constantly keep you in fear.  They are in the business of providing the financial buzz, they are not in the business to educate you to become a better stock investor.
 
To conclude, always keep your investing method simple.  Make used of the time tested formula and invested a fixed amount monthly.  Let the power of time and compound interest do it magic tricks for you.

http://www.sap-basis-abap.com/shares/the-average-investor-is-better-off-trading-long-term.htm

Ignore shares and get poorer.

Diary of a private investor: ignore shares and get poorer
Our private investor is back - and he says that savers who are prepared to take some risk will prosper.

Despite the Gulf of Mexico oil spill last year, BP shares are doing well Photo: PA

By James Batholomew

10:51AM BST 06 Jun 2011

After the glorious year of 2010 - for the stock market anyway - this year has, so far, been a damp squib. First it was up, then it relapsed, then it rose once more before retreating again. As I write, it is within 2pc of where it started.

As Lady Bracknell said in The Importance of Being Earnest, "this shilly-shallying is absurd". Which is it to be? Will shares finally rise or fall?

On the bearish side, I'm told, by people who ought to know, that Greece is bust, whatever the politicians say. Another well-placed individual has the same opinion about Ireland.

If either is right, shares could fall heavily on the day the default is announced. Some people say "it is already in the price", but I doubt it.

On the other hand, shares still look good value. I own some in BP which, at 458p, stands at a mere 6.8 times forecast earnings for 2011.

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Its adventures in Russia do worry me a bit and, of course, the shadow of the disaster in the Gulf of Mexico still hangs over it. But rarely in its history have the shares been treated with such disdain.

Professional and lifelong investors are now generally back in the stock market. But many private individuals are still holding back.

Over the past few years, I've talked to quite a few people about their investments and found they can be divided into four sorts.

The first thinks shares are too risky. They remain almost entirely in cash. In some cases they have good reason. Some have a limited amount of money and a very specific thing - such as school fees - which they want to be sure they can pay.

Others argue that shares are unpredictable and they don't know anything about them. Better to keep the money safe in the bank. These people have their reasons. But over the long term, I've seen so many of this sort, who were once well off, become very gradually much less so. I knew the daughter of a Seventies multi-millionaire who inherited her fair share. She kept the money in a building society and is now, frankly, just getting by. It's frustrating. She could have stayed rich.

The second group consists of those who have made quite a bit of money but have not had much time or interest in managing it. They were then persuaded by persistent, charming salesmen to invest in certain funds. For these salesmen, nothing was too much trouble. They visited them in their homes. They brought wonderful, sophisticated brochures and "personalised" recommendations.

The untold story which the salesmen never quite got around to explaining in detail was the full extent of the commissions and expenses involved. The people in this group have generally had a pretty thin time of it over the past dozen years.

The FTSE 100 is still rather lower than it was in January 2000, and all those commissions have eaten a substantial hole in the dividend income.

The third sort are thrill-seekers. To be honest, I know only one person in this group. There was a time when he got very excited about shares and was dealing on an hourly basis, following recommendations from a broker. After initial success, he lost a bundle and decided to give it all up.

Long-term, persistent portfolio investors are the fourth group. They have built up experience and understanding. They tend to have done best.

But where does that leave the sort of person who has other things to do and does not want to spend time building up experience in shares?

My flippant answer would be "poorer". You make your choices and live with the consequences. Trying to be more helpful, let me suggest this: how about putting, say, 15pc of free cash in a selection of lowest-possible-cost tracker funds? And then increasing the amount each year up to a level with which you are comfortable?

This way, you will not give away a fortune in commission. You will keep most of the dividends. You will not have to worry about selecting individual shares. And you are likely - though not guaranteed - to be richer in 10 years than otherwise. You could go for a mixture of, say, half of the invested amount in a FTSE 250 shares fund, a fifth in a Far East fund, another fifth in a US fund and a 10th in an emerging markets fund.

http://www.telegraph.co.uk/finance/personalfinance/investing/shares/8558975/Diary-of-a-private-investor-ignore-shares-and-get-poorer.html

Never Sell A Winner and you end up being a long term investor

I will regularly add to my winners (at ever higher prices), and I will cull the losers from the portfolio during market corrections. But most importantly, it is my intention to never sell my winners.

Warren Buffett didn’t get rich by selling 10% gains on his stocks and companies. He (and his investors) have gotten rich by making “permanent” investments. His timeframe is famously “forever.”

I expect my “forever” to be a very long time. If my investments are in companies that are consistently earning money and growing their businesses, and I stick with them through thick and thin, do you think I’ll be able to outperform the 1% APR I’m earning on my savings account these days? I think so.

http://www.chicagosean.com/2011/03/06/never-sell-a-winner/

Long-term Investing: An Insight

http://www.marinisgroup.com.au/articles/long-term-investing.pdf


This is the first paper in an annually updated series that gives investors an
insight into longer-term returns from various asset classes. It is aimed at
helping investors think carefully about their portfolio decisions. Investors should
understand their personal time horizons for their various investment portfolios
so that sensible, wealth-enhancing decisions can be made. Simplistically, an
investor saving for a home deposit in one year’s time will be focused on capital
preservation, whereas an investor saving for retirement in 30 years’ time will
place greater importance on capital growth and long-term returns. This paper
should be read alongside another Perennial paper, The Wisdom of Great
Investors, which brings together the principles of investing from some of the
world’s greatest investors.


http://www.marinisgroup.com.au/articles/the-wisdom-of-great-investors.pdf


The Wisdom of Great Investors
“If you can keep your head when all about you are losing theirs . . . yours is the Earth and everything
that’s in it.” And what’s more, you’ll be a successful investor!
(Apologies to Rudyard Kipling


The Wisdom of Great Investors brings together the principles of investing from some of the world’s
greatest investors who have not only lived through but also prospered in diffi cult times.
Though each of these great investors offers a different perspective, the common theme is that
a disciplined, patient, emotionally detached investment approach can help you to reach your
long-term fi nancial goals.
At Perennial, we believe their collective thoughts are an invaluable insight into long-term investing
and may help you in preparing your own mindset to successfully build and preserve long-term
wealth.




http://www.marinisgroup.com.au/

Range of Stock Market Annual Returns

What Are the Advantages of Long Term Investing?

What Are the Advantages of Long Term Investing?

Apr.19, 2010

Long term investing is a simple strategy that lets you make money over the long term. The only thing you need to do to take advantage of this is to buy stocks in strong companies and hold onto them for as long as you can.

There are a few big benefits to doing this.


1. This is backed by History


While over the short term there is no guarantee of making money in the stock market, over the long term it can actually be relatively safe and likely to make you money. Time after time strong stocks have gone up over the long term and it is likely to stay that way for the foreseeable future.

Over time this slowly but surely investment style can actually add up pretty nicely.

2. Low Maintenance


A second advantage of long term investing is that you don’t need to constantly watch the market and be active in the day to day news. In fact doing so will only stress you out and have next to no affect on what your portfolio is actually doing. Instead, the only thing you really need to do in order to invest into the long term property and hopefully build a lot of wealth is to buy a 20 or more stocks in companies that you really believe in and just hang onto them over the long term.

3. Dividends
The last advantage of investing into stocks over the long term is that many of them will pay their investors a nice consistent passive cash flow in the form of a dividend. Dividends can add up over time, in fact many professional investors consider dividends to be the part of the investment that makes them the most money. Regardless of that, it can be a nice way to make some passive income.