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Alba Iulia
Thursday, August 5, 2021

The charm of short-term gains

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Mervin Medelhttp://Philtimes.com.au
I am a stock market investor. I have been in the Philippine stock market since 2009. I read a lot about value investing and fundamental analysis. I am a big fan of the billionaire Warren Buffett. I use his investment philosophies as my style of investing.

 

Some things just take time: you can’t produce a baby in one month by getting nine women pregnant. – Warren Buffett, who became a billionaire through stock market investing

 

One reason why segments like Juan for all, all for Juan and Laban o Bawi of Eat Bulaga are popular is, many like to play a game of fortune.

Many like to queue in lotto outlets and bet in casinos to try their luck. In other words, many just prefer the short and easy way than taking the hard one.

Sadly for them, lady luck never meets them in the eye.

In the stock market, there is a culture of trying to make a quick buck. And many are satisfied when they profit a few dollars or pesos in a day’s trading. Not bad though.

Try attending stock market seminars and you’ll notice your seatmate is one of them. Many, if not all, are simply short-term oriented.

Will this lead to success in the long run?

The speculator

I asked an expert one time about the trend of DMC (David M. Consunji, Inc.) stock by looking at ‘moving averages.’ It’s a kind of stock analysis based on price averages within a number of days, say 50, to spot a trend.

It suggests that a trader buys shares when he sees an upward trend and sells when the trend is in a downhill.

That guy saw a downward trend coming and told me that it’s an indicator to sell. I didn’t sell, however. Its price still went up and I then sold my shares in April 2013 eight months after what he told me.

Though his analysis is based on moving averages, which to some is considered reliable, I still consider it as speculation.

A speculator is someone who tries to time the market. He moves in and out like dancing the tinikling. He goes in when he sees an upward trend and out when it’s downward.

Benjamin Graham, the teacher of Warren Buffett, describes it best when he says:

It is the essential character of the speculator that he buys because he thinks stocks are going up, not because they are cheap; and conversely when [stocks are going down] he sells.

They’re like guys who like one-night stand and call it romantic; they don’t like long-term relationships; they’re afraid of commitment. They just like short time and captivated by it.

They also find excitement in listening to tips and rumors to make money swiftly.

The excitement they have during a bull market, however, may turn to anxiety when that same bull runs off the cliff. The aim of making money the quick way may actually end up losing it quick.

During the 2008 market crash, many lost money, lots of money. And most of them I believe were speculators or short-term oriented traders. Most were simply in a hurry to sell even at a loss.

Source: Yahoo images
Source: Yahoo images

Success story

Many times I heard and read experts say, ‘don’t be greedy.’ I know they’re pointing to day traders telling them to sell whenever they make a considerable profit.

But how many times can traders be successful?

Don’t confuse luck with success. I said this in one of my previous articles but I will say it again. The true measure of success is consistency.

Success takes time. It’s not sudden.

If in one trade a trader makes money but doesn’t in the second, fourth, and so on, that’s luck. Success is making money year in and year out, whether the market is up or down.

A week, a month, or even a year’s performance can’t even be a gauge for success in the market.

Warren Buffet says, “. . . one year is far too short a period to form any kind of an opinion as to investment performance, and measurements based upon six months become even more unreliable.”

The funny thing is, many are fascinated with luck in the stock market. So, a lot do resort to technical analysis and listen to tips and rumors to have a quick money. Always quick money.

Let me tell you Warren’s record. He has an average return of 20 percent not in two years or three but in 48 years!

If Warren became a billionaire, those who stayed with him for years (those who didn’t sell) became millionaires. That’s the right way to meet success in the eye.

Never be captivated with the charm of one-night stands in the market. Stay committed to wonderful businesses.


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