Investing is a long-term process. Trying to make a quick buck in the market is possible, but it’s hard work and difficult to achieve multiple successes. Having a long-term outlook is critical to successful investing. Building a business takes years, but over time the rewards should pay off. Patience is required in the mean time, and if you try to rush the process of profit creation, you investing career may end in tears.
Shares are not lottery tickets, they're an ownership stake in a business and should be treated as such. You wouldn't have your house valued every day, so why would you feel the need to check the value of your securities' holdings minute by minute?
Seth Klarman, one of the best value investors alive today, understands the need to have a long-term outlook when investing and he's written on this topic many times. Here are some of his best views on the matter.
A Long-Term Outlook is crucial for outperformance
Today, one of the biggest issues stopping investors from taking along-term Outlook is technology:
"Beyond an investor's speculative impulses, technological innovation over the years has compressed investor time horizons. Technology enables a money managers performance to be measured not only annually, quarterly, or monthly--but of course daily, hourly and constantly."
This constant performance measuring drives investors into an "absurdly short term orientation."
Just like Warren Buffett, Klarman believes that the best holding period for a stock is forever:
"Except for an arbitrage or a necessarily short term investment, we enter every trade with the idea that we are going to hold to maturity in the case of a bond and a really long time, potentially forever, in the case of a stock."
In a world that's increasingly short term focused, Klarman's long-term focus stands out, and it also gives him an advantage. While other managers chase short term performance targets, Klarman can take advantage of short term market moves to build positions in companies that he believes have an attractive long-term outlook:
"We've maintained a commonsensical, albeit increasingly unconventional approach to investing in that we strive to maintain a long-term perspective in a world of short term actors, and we patiently hold cash in the absence of compelling opportunity, refusing to pull the trigger until the target is clear and compelling."
"We are always long-term oriented. We never attempt to gauge near term market movements; we have no edge there. We strive to make long-term investments that have truly compelling risk-reward characteristics. We are never afraid to stand apart from the crowd. We stick to our game plan and focus on areas where we are skilled and experienced. We are resolute in resisting the short term performance pressures and herd behaviors that plague the investment business."