Join our community of smart investors

Long-term vs short-term: Investor mindset matters

The long term is very different from the short term, so long-term investors need a different mindset
Long-term vs short-term: Investor mindset matters
  • Fees and dividends have a much bigger impact on investor returns over the long-term than the short-term 
  • Future technological change is a factor which should only play on the minds of long-term investors

The Brothers Grimm told a fairy tale, Hans In Luck, in which the protagonist starts with a big lump of gold and makes a sequence of trades each one of which seems reasonable, only to end up with nothing. This story applies to investors, because we too can lose money in the long run because of decisions that seem sensible in the short.

One example of this is trading itself. Any individual trade seems reasonable, like Hans trading his gold for a horse. But taken altogether trading costs us money. As Brad Barber and Terrance Odean concluded in a classic paper, investors “pay a tremendous performance penalty for active trading”.

To continue reading...
Join our Community of Smart Investors
  • Independent full-length company analysis
  • Actionable investment ideas and recommendations
  • Expert investment tools and data
  • Stock screens from Algy Hall
Have an account? Sign in