Business & Investment

Should you invest like Warren Buffett and plan to keep your investment forever?

Warren Buffett is a well-known value investor and states that his company’s preferred holding period is “permanent.” “Money is used for investment by investing and owning a good company for a long time,” he said. And there’s no doubt about it: investing is a long game. Day trading or being too aggressive means taking significant risks and endangering your portfolio.

There is a lot of speculation in the market these days, but just looking at the price of Bitcoin shows that it has skyrocketed 360% in the last 12 months. Buying and holding high quality stock is arguably a much safer approach.

Should your retention period be “forever”?

However, there is one thing that requires you to hold shares forever. It’s different from actually doing it.Even Buffett’s own company Berkshire Hathaway Buy and sell stocks throughout the year. With the announcement of the 13th floor filing, Buffett fans are rushing to see their latest holdings. Many investors will file a lawsuit and buy or sell the same stock in the hope of imitating the success of the company.

But the bigger problem with saying that you plan to hold a stake forever is that it’s not a practical strategy these days. When Buffett began investing decades ago, globalization wasn’t like it is today, and technology wasn’t changing at today’s pace. Changes are too fast to be taken for granted, and doing so can leave investors vulnerable.

A good example is a company like this Amazon It can constantly innovate, expand into new industries and disrupt traditional business models. From buying Whole Foods and trying to change the retail experience on Amazon Go stores without lines or checkouts to offering checking accounts, the company has repeatedly proven that there is always room for innovation. doing.

Why there really isn’t an optimal holding period

One of the things the COVID-19 pandemic has taught investors is how unpredictable the market is. Although the stock market should have crashed all year round due to the increase in deaths due to the coronavirus and the closure of businesses, many stocks were strong in 2020, and some stocks reached record highs. Shopify In 2020, it surged 178% as consumers spent more online than in stores last year.With stimulation Benefits of recovery Despite increasing unemployment, it helped keep cash in the hands of consumers, and low interest rates allowed businesses to take on cheap debt.

The lack of predictability in the market is why, especially in the long run, investors should not assume that today’s good buys will continue to be good buys 10 or 20 years from now. Many things can change in just a few years, let alone 10 years. It is important to carefully monitor how investments are being made and how the industry is changing.

Even growing stocks like Shopify, which continually innovate for added value, are not always a safe bet. Innovation is a continuous process, and even something like a change in leadership can have a significant impact on a company’s long-term trajectory. AppleFor example, under CEO Tim Cook, Steve Jobs is on a more conservative path than when he was in control. Is it another company and is it worth the value today? Dividend Investor + More than a growing investor who bought a company’s stock 10 years ago.

For serious and long-term investors, it sounds like a good investment period forever, but in this era it may not be very practical.

Stupid contributor David Jagielski There are no positions in any of the listed stocks. John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s Board of Directors. David Gardner I own shares in Amazon and Apple. Tom Gardner I own a stake in Shopify. Motley Fool owns and recommends shares in Amazon, Apple, Berkshire Hathaway (Class B Share), Shopify, and Shopify, and recommends the following options: The short one in January 2022 is a $ 1940 call on Amazon, and the long one in January 2021 is a $ 200 call on Berkshire Hathaway (Class B Share).

Should you invest like Warren Buffett and plan to keep your investment forever? Should you invest like Warren Buffett and plan to keep your investment forever?

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