Short-Term vs. Long-Term - Voting & Weighing Machines

Short-term vs. long-term is an investing topic that will never go out of discussion. As the famous Grahamian adage goes: “In the short-term the market is a voting machine. In the long-term it’s a weighing machine”. Even though this famous quote is decades old, I believe it still holds true today.

All market participants seem to consider themselves “long-term investors”. Market behavior suggests the contrary.

The reason I believe this holds true is simple. The longer you are involved with investing and markets, you see it all the time. What Graham means by his saying is that stocks can do all sorts of things in the short-term, but in the long-run, business fundamentals guide the share price. If the company does well, the stock will do well.

Since the market is reactive, as an intelligent investor you need to be proactive. Once again I’ll paraphrase Buffett:

“You’re not right or wrong if a thousand people agree with you, and you’re not right or wrong if a thousand people disagree with you. You’re right because your facts and reasoning are right”.

Mr. Market exists to serve you, not to guide you.

Though the enlightened ways of value investing are quite well known, I would argue that the absolute majority of investors (be they individuals or institutions) do not adhere to its teachings. Good. As an intelligent investor, you want the market to be irrational. If you are offered a business that you understand, that meets your standard of quality, and at a very attractive price, why wouldn’t you take the offer? Especially when you come to the conclusion that its low price is due to Mr. Market having negative sentiment on short-term issues.

-IGTSKasimir

Ignore The Street

Intelligent Investing Since 2019

Short-Term vs. Long-Term – Voting & Weighing Machines

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