It's an oft demonstrated fact that holding on to a position in a great company like Crisco will yield returns that no trader can achieve over any lengthy period.
I would just say, the market is always changing. Through the early and mid-90s, cos. like CSCO posted steady gains. A hot stock was one that could double in a year. The advent of the dotcoms in 97/98 accelerated the gain cycle. By 1999, gains that earlier would have been spread over a decade came in a matter of months. I bet you remember a stock called QCOM <g>. When has a large-cap S&P500 co. ever gone up 26-fold in a year? In hindsight, it does not seem strange that the correction phase was likewise compressed to a few months.
What does that mean for an investor? You can start off as LTBH, because that's the way many people made their fortunes in the 80s and 90s so that they could buy their second homes and airplanes yadayada. That approach makes sense if a stock price is increasing year after year at 20%, 40%, 80%, whatever...but when it gets to like 800%, 1000%, etc., I think it's important to be more vigilant about guarding profits. I would rather be LTBH myself, and I agree that approach has the greatest potential for profits, but I also believe that "long-term" is out of keeping with what is going on in a large part of the market. This opinion of course reflects my bias, which has changed from aggressive growth to more capital preservation. But I am also very concerned by a lot of trends that seem unsustainable, including:
* the abovementioned super-rapid gains in stock prices over short periods of time
* the increasing number of businesses that seem to have been created simply to "go public"; whose goal is not to make money as a going operational concern (profit generator), but to simply sell out to the public or to be acquired (in contradistinction to the "silverbacks", which came public at a time when businesses still had to be profitable)
* the cynicism bred in our capital markets by the waxing of greater-fool investing, which I believe causes serious misallocations of capital that may take many years to correct
* the firm conviction on the part of many that one only has to ride out the short-term blips and one will find the promised land of profits and prosperity; I don't believe this is some self-evident truth...instead, it is simply an approach that has worked so far in a bull market, but whether it will work in a bear market is another story |
