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Tales of a Technician: Of Legacies and Long-term Investing

September 14, 2020

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Last Update: July 2021

When I first start trading, I was caught in the trap of “short-termism.” My focus was on what the market was doing over the next few minutes or days. Without realizing it, I was playing in a low probability environment that required a high skill level. Instead of embracing the powerful odds of a rising tide, I was betting on the ebb and flow of each wave.

Then I had kids and everything changed.

Tales of a Technician: Of Legacies and Long-term Investing

Investing for the future becomes clear and present when you start to think about posterity. My time horizon shifted from days and weeks to decades, even multiple generations. Do you know how powerful investing $1 today becomes when you look at the potential for growth over decades? It’s utterly incredible.

For me, the easiest way to embrace bear markets, to look upon them fondly, is to set your sights on the long, long run.

Perks of a Long-term Perspective

  1. First, it allows you to weather the downturn without panicking and selling your stocks.
  2. Second, it trains you to buy when stocks are on sale. To those with the proper mindset, sinking prices are viewed as a godsend that triggers greed, not fear.

Rightful Owners

The following quote is attributed to J.P. Morgan,

“In bear markets, stocks return to their rightful owners.”

J. P. Morgan

Warren Buffett, the Oracle of Omaha himself, said something similar.

“The stock market is a device for transferring money from the impatient to the patient.”

Warren Buffett

There’s no way that a trader obsessing over the market’s movement over the next week will hold through a bear market. Their shortsightedness will inevitably shake them out.

If my time horizon is decades, why again should I care if the market suffers a temporary 30% decline? I shouldn’t! It’s a blip on the long-term radar. I find that when such trying times arise, reminding myself of my goals and plan helps to ward off the temptation to panic.

The rightful owners of a stock are those who have the wit and will to withstand the ravages of volatility and bear markets. I want to be one of them.

Never Waste a Crisis

I first heard the phrase, “Never let a good crisis go to waste,” in 2008. It works in the political sphere to get legislation passed when the public is clamoring for action. But it also applies to the field of investing.

Bear markets don’t come around that often. Historically we get a good 20% to 50% decline only once or twice a decade. These rare events usher in golden opportunities to grab equities at fire-sale prices. If my objective for purchasing stocks is to fund my kid’s college in 15 years, then do you think I’d rather buy shares at record highs or 30% off the peak?

Or, if my goal is to grow my wealth to adequate levels to generate sufficient annual income to fund my retirement in a few decades, then which do you think helps me reach that goal quicker?

Why, buying at the massive discount, of course!

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3 Replies to “Tales of a Technician: Of Legacies and Long-term Investing”

  1. Fuad says:

    As Benjamin Graham said: “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
    If you invest in good businesses, the weighing machine will appreciate the value of these good investments.

    Thanks again for a great reminder to think of the long term.

    1. Tyler Craig says:

      Love that quote. Thanks for sharing, Fuad.

  2. ValentinaSalge says:

    Great post, Tyler. Thanks!

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