The holding period for Amex stock spans more than half a century! Why does Buffett invest so long that he calls it "permanent" long-term investing?
Buffett's investment style is a well-known long-term investment, extending to such a degree that it can be said the holding period is permanent.
He invested in American Express in the 1960s, and it still makes up a large portion of his portfolio.holding period has already surpassed half a centuryand is worthy of being described as “permanent.”
Reasons why short-sighted investing fails
Why does Buffett hold this belief?
When you look at the world, there are not a few people who earn enormous profits through short-term trading. Seeing such cases, it may seem more efficient.
In reality, many people dream of striking it rich in the stock market. People who come to me for advice are not rare in thinking so.I sometimes feel that most people are thinking only that.
However, reality is not so sweet. Short-term stock price movements are called a “random walk,” making them extremely difficult to predict in advance.
Some people do get a streak of success in short-term trading. But when they become overconfident and chase a big windfall, they take too much risk, andthat is precisely when their predictions fail, and they lose their assets overnight.
This is why famous individual investors sometimes vanish. The speculator Jesse Livermore built enormous wealth but also went bankrupt many times due to excessive risk, and in the end took his own life.
Whether short-term or long-term, those who cannot manage risk do not succeed. And once you get hooked on short-term trading, you inevitably venture into high-risk trades.Buffett chooses longer-term investments that are considered to be lower risk.
Short-sighted investing loses reason and, as a result, money and time
Long-term investing is a game with a positive expected value
Nevertheless, many people still seek short-term gains. This can be described asthe primal human instinct to eat what is right in front of you.
Therefore,long-term investing has an edge.
Many people are dazzled by immediate profits, while fearing future risks, which makes them tend to avoid holding stocks for the long run.
Herein lies the source of profits.Academically, this is called the “risk premium”. It is the return earned for taking on risk (things people dislike). Because of this,long-term investing universally yields a positive expected value.
Bezos: “Why doesn’t everyone imitate your investment strategy?”
Buffett: “Nobody wants to get rich slowly.”
Investing that you buy once and never sell
If you were to name one more reason for long-term investing,peace of mind for mental healthexists.
“Is this stock (the company) safe?”
“When should I cut losses as it drops?”
“Should I sell stocks that are rising?”
If you think about such things, you won’t sleep well at night.
However, stock price movements are random. Worrying about such things will not make you rich.
On the other hand,good companies accumulate profits over time and increase their value. In other words, if you own good companies, your wealth will increase without you worrying about stock price movements.
If you build a portfolio with such companies, you can sleep soundly at night and gradually see your assets grow without even realizing it.Choosing stocks that you never need to consider selling once you buy them is the job of a long-term investor.
Even if the stock exchange were to close for ten years, only buy and hold those you would be happy to own
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