Post of the Day
January 7, 2000
Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light.
Interesting 150 or so posts I just skimmed through. No need to single out Qualcomm as being the only equity to be hit in the beginning of the year 2000 profit taking frenzy. Retail investors, professional money managers, mutual funds and 'others' have huge, huge gains and since goals can and do include - taking profits and taking some of those gains off of the table at various times - it happens. That's the business.
Hey, Iomega was up 1/16th yesterday, Rambus was up 2 and change and even LHSP was up 5 and change.
Some interesting posts about market timing, valuations and lemming mentality have been presented. I'm glad that these are brought up as it proves that we not only need contrarian opinion, but without it - we should be worried. Every successful stock board has it. No need to get 'mad' about it. Plenty of investors make money on the way down, by trading and by using options, LEAPS and other methods. Nothing wrong with that. We all have our own unique strategies and way of investing. As well, we all have our own goals and they should be different. If an investor is happy with a 25%, a 50%, a 100%, a 200%, a 500% or a 2000% gain and wants to stop at any of those points - so be it.
The focus for long term investing is to know your company, do your research and be thorough enough to understand that the valuations will fluctuate with the markets ups and downs along with the goals of other investors, professional managers and funds. I can look back to September/October of 1998 or the same two months in 1999 (or many periods like them over the years) and remember where my investments were and where they have gone since then when we hit the opposite extreme on the upside. For that matter, I can remember back 5 years, 10 years, 15 years and longer to see where I was and where I've come since then. Sure, one could buy and sell at the extremes with all of their core holdings provided they time it pretty closely - and there are people who can do this pretty well. Sure, one can buy some great companies and just let them ride through all the manic and the depressive points in the market and do quite well if they have chosen the 'right' investments. Sure, one can mix the two strategies. It all depends on your goals - and you should have some goals.
Along the way we all make mistakes - and that is the beauty of it all. We learn, adjust and move on. We should all have the lesson of buying at the top and selling at the bottom at least once or twice. We should all have the lesson of doing great research and drawing a blank or a dud performer over the years when our research proved flawed for some reason. We should all have the experience of having 'another opportunity' because, believe me - there will be other opportunities.
|"Not to worry, the 'financial community' makes plenty of money in both directions and will continue to get richer and richer."|
The financial community will do its best to inform us not to get complacent, not to get comfortable with investing and to always 'take some off the table' when things look the 'best' or when things look 'ugly'. Not to worry, the 'financial community' makes plenty of money in both directions and will continue to get richer and richer. What's a long term investor to do? You can either ignore it (which is easier to do if you have done your research well), or you can go with it. There are strategies for both, but ignoring the majority of it seems to be the best medicine. Will there ever be the 'perfect' entry and exit point for a long term equity? One might come pretty darn close, but in the end, time is the most important portion of the long term equation. I hold wildly successful stocks in my portfolio that have taken over 50% corrections after buying them. I hold wildly successful stocks that have not had such swings. Mix them all together and add time to the equation as well as research and goals and the formula is pretty compelling.
Risk is a factor. Investing in an equity involves risk. Choosing stocks that meet one's risk tolerance is key. Is it a risk that our investment in Qualcomm may turn out to be wrong over the next few years? Yes, of course it is a risk. There is an equally compelling argument that we might be 'dead right' over the long haul. One who is not comfortable with such risk shouldn't be in the equity - period. Down markets tend to remove the 'not so sure investors' from such equities. That's why the Fool has taught us to invest in things we know and understand inside out. We cannot always know every detail, but with proper reading, study and analysis - a retail investor can get a firm grasp on a company regardless if we know anything about fiber switches, supply chain management, code division, muscle back motorcylces, titanium drivers, jet fuel prices, currency markets, online auctions or whatever upon entering our research of a particular company.
In closing, we need to understand our investments. We need to understand the plethora of strategies available to make money in an up and a down market. We need to understand our risk tolerance. We need to understand our goals and how we are best going to meet those goals. Diversity of opinion is welcome, just as diversity of strategies are welcome.
I have chosen the long term view for my investments because I like the advantage of having Mr. Time on my side playing starting Quarterback.
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