Investing in stocks is basically investing in pieces of business .There are some business that keep growing steadily year after year and by the sheer power of compounding it helps you create wealth in the long run if you just keep holding on it ( provided you bought it at the right price ).There are some business that will grow very fast for 3-5 years and then stagnate for few years and then be back again doing brisk business .Some grow briskly for a few years and then loose track of their business and go to the doldrums .
You need to identify which of these business you want to invest and what is the time frame you would like to hold . You will understand the time frame only when you understand the underlying business .Problem is people focus more on the price and not on the business and hence end up in mess .But understanding business is not an easy task especially for retail investors as many of us do not come from a business class to understand the business of the stocks that we own .If we have great business vision we would not be buying small pieces of business .In fact we will be setting up our own firm and listing the same in market .That is the reason why we are in TED to educate ourselves through shared collaborative learning .
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Very good piece of advise indeed. If we hold on to understandable business with a outstanding management and not to its stock value, for a considerable of time, it is bound to give good results.
IMHO as Buffet does, we should hold on to business which stand the test of time, simple businesses which do not promise extreme high returns in the short term but sustainable return throughout years and years.
I also feel Valueman has given an excellent idea of
three ScoreCards.
There are all sorts of investors here, some for short term(1-3) and some very long term(10+)..
So this idea would indeed cater to all kinds of investors here.
More ideas are welcome.
Edited by somu0915 - 26/Nov/2008 at 11:40am
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