The Challenges Of Being A Long Term Investor

If you ask most market participants, I think they'd say they are "long term" investors but what does long term mean? There are of course many definitions. For me, I tend to hold for many many years. Quite a few client holdings have been in the portfolio for more than 15 years.

Have you ever heard/read something like, if you'd put $1000 into some stock 25 years ago and just held it, you'd have some huge dollar amount today? It would be great to have put a few bucks into Amazon 25 years ago and have $1 million's worth today but what does that really look at feel like.

I've owned this stock for clients going back to at least 2011. I added in price levels of a few peaks along with subsequent declines. There are plenty more than the few I drew into the chart but want to make a simple point about how difficult holding a stock can be. 

Dropping from $27 down to $16 like in 2016 is a very difficult thing to sit through. Sometimes the thesis does change and you should sell. Sometimes stocks just go down for some sort of shorter term news and sometimes the thesis is just flat out wrong. If the thesis does turn out to be wrong then the investor needs to realize that or if the thesis still stands up and the market is "wrong" for a few months, then the investor needs to be able to recognize that as well. In the end we still might make a mistake in selling or make a mistake in holding on. 

Type 2 diabetes being a growth industry seemed like a pretty easy bet to make way back then which helped me in sorting out what to do and of course luck plays a big role in outcomes like this. T2D was one thing back then, there was obviously no reasonable expectation for drugs like Wegovy and Ozempic. Of course, better than those drugs would be to cut carbohydrate consumptions and lift weights. The thesis for the stock has worked so far because most people won't do that, they'd rather take medication even if there are side effects and Wegovy has a doozy of a list of side effects. 

Have you ever sold a stock, even if it did well, only to see it go much higher? Of course, every investor who uses individual stocks has done that. I will close out reiterating that it is very easy to get just one thing wrong and end up missing a great rise or end up sitting in something that ends up doing very poorly. An investor of individual stocks is likely to have some of both, that's ok, it goes with the territory. 

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.