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Just as everyone likes to fancy themselves middle class (the facts: unless you make between $2,894.83 and $4,335.75 per month, the middle quintile for the American population, you are not middle class), everyone likes to talk about how they are long-term investors. Unfortunately, the facts don't show that to be the case. While the average American stays in their home for seven years before selling it, many investors think displaying the same patience and horizon with a partial ownership stake in a company such as Pepsi or Johnson & Johnson is unfathomable. To them, six months is a long-term investment!
This begs the question: How can you be sure you aren't just fooling yourself into thinking you have the right time perspective? To help answer, I wrote a new article called How Do You Know If You Are Making a Long-Term Investment?, which includes a checklist to help you determine if you are in it for the long-haul or trading stocks and fooling yourself.
The article also explains that not every company should be a long-term investment. Typically, you only want to own so-called "excellent businesses" that have very specific financial characteristics. (For more information on that topic, instead, read Getting Rich By Investing in an Excellent Business).
Both should be good places to start for new investors who don't consider a good time to be chugging Pepto-Bismol in front of a trading screen, afraid to go to the bathroom for fear of losing their nest egg due to a change in the Dow Jones Industrial Average. Don't Fool Yourself Into Thinking You Are a Long-Term Investor If You Aren't originally appeared on About.com Investing for Beginners on Saturday, December 31st, 2011 at 22:12:26. Permalink | Comment | |
