Oh, whatever. Too bad none of us actually behave like we speak.
This was illustrated at a conference I attended. This was a conference full of investment professionals – you would think they knew better. A portfolio manager was talking about Company A. This portfolio manager was more than glowing with his praise for Company A. It seemed like a sure thing. But wait, Company A was only a good long term investment but didn’t look attractive right at the moment.
In my opinion, an investment is an investment. A company is either attractive to or it is not – the time period is irrelevant. This portfolio manager (and most others for that matter) calls himself a long term investor. His behaviour is at odds with this, however. He believes he can buy this stock cheaper in the short term. He is a closet Market Timer not a Long Term Investor.
In my opinion, we spend too much time saying things like:
- “The market looks good for the long term but is a bit heated at the moment”
- "I like the company not the stock”
- “I think I will wait until I can buy it cheaper”
Now I am not saying valuation is not important or that some market timers cannot make any money. What I am saying is stop kidding yourself that you are a long term investor if you really are not. I do have to be honest though and say that I believe being a long term investor is the best way to allocate your hard earned capital. Is there a better way to build an income stream (see more here) over your working years than buying great companies which can pay decent dividends and grow their earnings ahead of inflation over the long term? I believe not.