Long term Investing

Posted on 28 March 2014 by Douglas Chadwick

We are now well into the ISA season madness. Everywhere I am reading about the importance of making long term considered decisions which I must stick with going forward through thick and thin performances. Financial advice along these lines is coming from the lips of a multitude of Financial Advisers, all of course advocating their own company`s funds. To me this type of “long term” investing has its roots in the philosophy of Las Vegas. Recently many of these pundits have been advocating investing in Russian funds, before that it was Emerging market funds and of course we have the continual perceived wisdom of owning gold funds. Well anybody following this advice last year would have caught a major cold in their bank balance. They were gambling on certain events taking place and the timing was just simply wrong. Just a thought- If all the Financial Analysts in the world were laid end to end it might not be such a bad thing. Why can long term investing not be considered as a series of short term decisions? In manufacturing when making moves towards product improvement one uses the system called “Kaizen” which means taking small steps forward on a continuous improvement basis. This method allows mistakes and errors of direction to be quickly and cheaply rectified before too much damage has been done. To allow this to take place one needs to have access to a constant supply of measured information so that the correct decisions can be made. Surely investing would benefit from this approach. Certainly we at Saltydog have access to these numbers and the portfolio results show the benefits of taking this shorter term approach. It`s the old question “How do you eat an elephant?” and the answer is “Slowly, and one bite at a time.” Maybe this is the approach that President Putin is taking as he starts to re-assemble the old USSR. Last year he took back control of Georgia, now it is the Crimea and perhaps the next course will be Moldova, followed by the remains of the Ukraine. He is making a long term investment by simply making small incursions to achieve his end game. I guess he hopes that each step will be insufficient to cause a major reaction from the West. I do believe he will continue with this approach as long as the numbers say he will succeed. He is just simply making investments for Russia in other people`s land.