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Investing

Thinking long term

Perspective is everything. If your thinking is calibrated to the short-term, events like the ongoing political shenanigans matter much. You are probably looking at your NSE stock portfolio worried about the bear run the equity market is on. But if your thinking is calibrated to the long run, you weight short-term events like the present politics much less, and you are probably looking at the NSE celebrating the bargain prices for certain companies. Perspective, really, is everything.

Warren Buffett says that you should only buy shares in those companies you would feel comfortable if they were no longer traded on a stock exchange and you had to hold them for 10 or 20 years.

Evaluating something with a time horizon of 10 or 20 years improves your thinking by adding a layer of objectivity and reducing the impact of short-term events. Consider an investment opportunity in a hotel at the Kenyan coast. If you evaluate the prospects for beach tourism over the next few years, investing may look very risky given the current economic slump caused by our politics. If you consider the prospects over a 20-year period though, present politics fades away and you emphasize factors like economic growth, increasing disposable incomes, a bulging middle class, better infrastructure, and the steady improvement of our institutions.

Yesterday we celebrated the heroes and heroines who fought for our independence. They could not have been certain that they themselves would live to see independence- and many of them did not. But they knew their actions would reverberate through time. Celebrating them is also celebrating long-term thinking.

 

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By Brian

I’m Brian Gachichio: a business strategist and financial analyst. I write and advise on the art and science of building businesses.

My goal is to provide innovative thinking that leads to high-impact solutions to business problems and produce above-average results.

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