Hello everyone, and welcome back to Investing with Antoaneta. The stock market has been pretty hectic lately, and there’s been a lot of confusion going around in the investing community. So, I figured it’s about time we had another chat about mindset. Or, more specifically – the long-term investing mindset.
As always, don’t forget to give the blog a like and share it with your friends if you’d like to see me make more content like this. Or, well, I’m going to keep doing my thing either way, but it really helps with visibility, so I’d really appreciate it.
Now, I did make this blog with beginners in mind, but I believe that even the more experienced of you can benefit from hearing this stuff. There’s just so much going on with the market recently that it’s super easy to get carried away. I’ve known all of this for a long time, but there are still moments where I almost fall into obvious traps. And believe me, there are a lot of those around right now. Check out my other blogs such as, “My Top Five Stock Suggestions For June“.
Long-term investing is very similar to running a business. Or, really, to everything that you plan to do long-term in your life. Healthy dieting, exercise, learning languages, advancing your career, etc. All of these have one big thing in common – the essentials are absolutely vital. Because, yes, it’s easy to just “jump right in” and start doing stuff. But if you don’t understand the essentials and you’re just “following your instincts”, you will have a ton of difficulties later down the line.
So, long-term investing essentials:
Diversification is key
Never put all your eggs in one basket. This one is really, really basic. You don’t want to put all of your money into just two or three stocks. Ideally, you’re aiming for twenty-plus. Personally, I prefer to hover around thirty. That’s thirty different stocks, spread across multiple industries (because I don’t want to end up in a situation where the industry gets massively disrupted by some huge innovation, and I’ve got all of my money locked into businesses that lose all of their customers, for example).
Never put everything you got into the Stock Market
Always keep some cash on hand. Again, basic stuff. Holding on to a solid cash position gives you a ton of benefits. First, if some stock dips, you can buy the dip, obviously. If the market shifts overnight, you’re always in a position where you can capitalize on that. Then, you’ve also got the confidence factor. And this is a big one. So, you obviously know that you’ve done your research. You’ve got faith in your current positions. The only thing that can catch you off guard is some unexpected shift. But with this cash position, you know that you won’t miss the opportunity even when the unexpected happens. The simple fact that you know that you are prepared does wonder for your self-confidence, believe me. So many people out there get super upset when the market drops. I’m never bothered by that. For me, a price drop means more buying opportunities. And this cash position is a big part of it.
“Our Favorite Holding Period Is Forever.” (yes, it’s a Buffett quote)
Moving on to number three – the long haul. It’s in the name. Literally. I’m a long-term investor because I want safety and stability. I’m not here just to make some quick cash and get out. I’m here to find businesses that will help me turn my money into more money year after year.
Besides, successful businesses plan ahead. You’d be hard-pressed to find a business leader who “made it big” by chance. It just doesn’t work like that. Long-term business success means long-term planning. And, more often than not, the long-term results come at the expense of the short-term. Tesla is a good example here – 10 years ago, the IPO’d at $17. A few months ago (at the start of 2021), Tesla shares were going for $880+. And, yes, there is volatility, but that same reasoning allows me to remain calm. I know that the company has incredible potential, and I’m sure that Musk is a man who knows how to leverage it.
Of course, not every business can be like Tesla or Amazon. Not every company deserves the trust and the money that you can give them. That’s exactly why I am picky. If you want to be a successful long-term investor, you have to be super picky. You want to go through all of the data, read all of the reports and make sure there is nothing you dislike about the company before investing. After all, you’re giving them your hard-earned cash. You’ve got every right to be picky!
These are perhaps the three most important core principles of long-term investing. They’re something that you should always keep in mind while looking at stocks, reading articles, watching videos, or doing anything that’s even remotely connected to the stock market. And, they’re even more important now, with the market and the global economy being in the shape that they are. I know that this blog has been going for a while now, but I want to take a moment and talk about this because it’s actually really important. It is one of the main things that got me to even make this blog. Yes, we’ve already talked about all of these on this channel dozens of times. But, there are just so many new people on the market right now, and I want to help them out.
So, here’s a brief summary:
- A lot of people received a bunch of “free money” from government handouts and various economic aid programs (not everywhere but in most countries)
- People had fewer opportunities to spend their money in the usual ways (no pubs/clubs, no vacations, limited traveling, supply of stuff like consumer electronics dried up, etc.)
- People were stuck at home with a lot of free time on their hands
- The economic climate worsened, and everyone started worrying about the future
- The media gave all of this a lot of attention (especially the Stock Market, the GME mess, and now – Bitcoin)
And, since a lot of stocks took a big nosedive during the worst months of the lockdown, it was “the ideal time” for the new faces to get into the game. And it’s not like I’ve got any issue with that. Actually, if I’ve got to be honest with you guys, I think this is great. I often say that the Stock Market is not for everyone (and we’ll get into that in just a second), but I believe that people should give it an honest shot before deciding. This is especially true for long-term investments since it’s relatively risk-free if you do things right.
But, here’s the problem – most people don’t really care about “doing things right”. And, please hear me out before getting all angry at me.
People are just impatient in general. Actually, hundreds of businesses and business models wouldn’t be able to make any money if the average person was calm, collected, and patient. Dozens of products and even (industries in some cases) wouldn’t have a reason to exist if people were patient enough to just do their research and learn how stuff works.
I can’t really snap my fingers and change the world. But, I can do the next best things – I can tell you all of this so that you don’t fall into this trap.
The whole idea of long-term investing is very simple in its core – buy low, sell high. But the inexperienced investors are very likely to do the exact opposite. Especially if they haven’t actually done their research. They’re much more likely to buy high, sell low and then get angry at everyone in the investing community and the world in general.
Again, I’m not trying to be mean. I get this very well because it’s not like I was born into all of this either. I come from a small village in Eastern Europe, and, two decades ago, I knew absolutely nothing about business or the stock market. Getting to where I am today took me a lot of effort and a lot of learning. And, believe me when I say this – I made a ton of mistakes along the way. But I didn’t give up. I also didn’t blame others for my mistakes.
And you wanna know the silly part about all this? Despite me (and countless other content creators) constantly telling everyone that they should not act like this, there will always be people out there who go and do just that. They will read an article or watch a video, get all excited and go big into a new position that they do not understand. Then, when the price drops, they’ll panic and sell at a loss. Naturally, they’ll be furious about the whole thing because they lost a bunch of money.
And what about the money? Who profits from this? Well, the money goes to the patient investors, of course – the ones who play the long game. They’ll waltz in, add a bunch of cheap shares to their positions and keep holding. It might sound harsh, but that’s how it works.
And that wraps it up for today. I hope that you all enjoyed the blog and found it helpful. If you did, please don’t forget to let me know by hitting the like button and sharing it with your friends.
As always, I’m open to ideas about future blogs (feel free to drop ideas & questions in the comments below, and I’ll try my best to cover them in the future blogs). Oh, and I’ve got some pretty interesting ideas for the next couple of weeks, so stay tuned (and subscribe if you haven’t already)!
For more of the same, plus a ton of exclusive content and a bunch of courses & ebooks (free for all members!), you can check out our Private Investing Group. We discuss stocks, talk about the state of the market, compare strategies, and generally have a good time looking at financial stuff. I’ll leave a link for you down in the description.
Alright, that’s all I’ve got for this blog.
Once again, thank you all for reading, and until next time!
Recommended for further reading:
- Business Adventures: Twelve Classic Tales from the World of Wall Street
- The Snowball: Warren Buffett and the Business of Life
- The Simple Path to Wealth: Your road map to financial independence and a rich
- The Business Book: Big Ideas Simply Explained
- The Lean Startup: How Constant Innovation Creates Radically Successful Businesses