The only way to make money in the markets is with a long-term perspective. That’s it! Instant-access, low-cost trading and a mountain of stock data are both a blessing and a curse. The fact is we have too much information available to us, and most of it is useless noise.
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…The advent of the personal computer – and now the smartphone – has revolutionized how we invest. The average investor now has a hundred times more information available to them than I had when I was working as a broker.
- First, online trading allows us to trade for a fraction of what it used to cost. When I was entering stock trades for my clients, the average cost for 100 shares was around $120 per trade, both ways…
- Second, we now have 24/7 access to our accounts. We can monitor them up to the second – and we can buy and sell in an instant.
- Lastly, we have so much fundamental and technical data available, it borders on overload. Just sorting through all that information is a chore.
…The focus is on short-term, minute-by-minute updates which have become a huge negative. It’s driving losses, not gains. The losses from having too narrow of a focus even have a name: myopic loss aversion. That’s a fancy term for selling in a panic based on short-term trends.
Whenever Warren Buffett is asked why he chose or owns a stock, he always – without exception – talks about a 10- to 20-year time horizon and fundamental analysis. There’s never a mention of a one-day (or even a quarterly or annual) trend. His focus is way out there and, if the best stock investor of our time has only a long-term perspective, why don’t we?
For years I have been telling my readers to do anything but sit at home and constantly monitor their accounts. This microscopic money management and short-term focus is costing you a fortune. The fear and uncertainty it produces only drives panic and emotional buying and selling. It doesn’t work, and there are no winners here.