The successful long term investor develops a long term strategy over time. A successful long term strategy can be a combination of a value orientation and riding winners. Both of these approaches help you avoid being sucked into market “tips” that only lose money and selling as soon as a stock makes a small gain instead of riding winners to greater profits.
A successful long term strategy makes sense. For example, if you are going to practice riding winners you need to be picking winners. Where do winners come from? They come from picking stocks with a value orientation. One certainly can outguess the market at times, getting in and out with great timing. However, compared to picking stocks based upon a value orientation, the in and out method is a loser over the years.
We did say we were talking about long term investing, right? Many years ago on one of the TV investment shows an investor talked about his success in market timing. The moderator interrupted and asked how much of the man’s profit was absorbed by commissions. It turned to be none as he had a seat on the NYSE. We should all be so lucky.
An advantage in picking stocks with a strong value orientation and riding the winners is that you are not paying commissions every day. The value orientation method allows you to pick winners and following your stocks with a value orientation allows you to practice riding winners as long as the value orientation fits. When the stock no longer fits your value orientation criteria that is the time to sell, no matter what the market is doing. An example is all of those profitless dot com stocks. Market psychology had its way and a lot of folks lost their retirement plans.
You will need to develop your own value orientation strategy depending upon your age, income, and how much risk you are willing to take. However, a true value orientation takes a lot of the speculation out of investing and holding stocks. You can certainly buy and sell depending upon what your value orientation strategy dictates. However, you will tend to be riding winners when others are licking their wounds. You will also probably be watching a portfolio with less clutter to it which is the other savings, your time.
There are certainly some very successful traders who get in and out of the market but this is a different style of investing. It fact it is trading and not investing. If you have a successful full time job you need to limit the time and attention to your investments to something manageable. A value orientation will make following your stocks easier. Riding winners so long as they fit your value orientation is also less time consuming than continually fretting over what new stock to watch or purchase.
Now, you will look for new stocks and you will get in and out of investments based upon your value orientation but a strategy based on riding winners and a value orientation will make decisions easier and the results more profitable.