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Beyond Guesswork: The Smart Moves in Long-Term Investing



Investing, huh? It's not just about hitting a few buttons and getting rich overnight. Nope, it's more like a slow-cooked stew; you throw in your ingredients, let it simmer, and eventually, you've got something pretty tasty.


Let's talk long-term versus day trading. You know, the marathon versus the sprint. Long-term investing is like planting a tree - you put in the work, you nurture it, and over time, it grows into something substantial. Day trading? It's like trying to grow a bonsai tree in a day. Sure, it might look impressive at first, but sustaining it is a whole different story.


One golden rule in long-term investing: "Buy and Homework, Not Just Buy and Hold." What's that? It's not just about snatching up a stock and hoping for the best. No way! It's diving deep into the nitty-gritty of that company. Checking their financials, understanding their business model, keeping tabs on the market trends, and seeing how they handle crises. It's more than just holding onto a stock; it's about actively engaging with it.


Some folks think investing is a guessing game, like throwing darts blindfolded. But guess what? It's not! It's more calculated than that. It's about analyzing companies, their growth potential, understanding their strategies, and being patient. The big shots in the investment world don't throw darts; they conduct thorough research. Warren Buffett once said, "Risk comes from not knowing what you're doing." Ain't that the truth!


Analyzing financial ratios like Price-to-Earnings (P/E), Debt-to-Equity (D/E), Return on Equity (ROE), and Earnings per Share (EPS) aids in understanding a company's performance and comparing it to industry standards.


Dividends are amazing! But investing solely based on dividends means you're fixated on the immediate rewards rather than the long-term potential of a company. A solid investment strategy requires a comprehensive evaluation of a company's financial health, growth prospects, market trends, and management quality.


Remember, companies can cut or suspend dividends due to various reasons - economic downturns, poor financial performance, or changing business strategies. Relying heavily on dividends without considering the broader picture is like deciding on a vacation spot solely based on the weather at one specific time - it might be sunny now, but who knows what it'll be like next week?


Now, individual stocks versus ETFs (We love ETFs with Acorns app). Individual stocks are like adopting a puppy; they need more attention and care. ETFs are like getting a pet rock - low maintenance. With individual stocks, you're peeking into their lives, checking their performance, while ETFs are more of a package deal - you get a bunch of stocks bundled together.


Researching individual stocks is like digging for treasures. You're not just picking a random shiny object; you're sifting through tons of rocks to find that diamond. It's a process, but when you find that gem, oh boy, it's worth it.


In the investing world, slow and steady wins the race. It's about strategy, research, and patience. So, put down the dart and pick up a calculator, because investing is a whole lot smarter than a guessing game.

Landon's Surge Lightning Research--



Long-Term Holdings:


1. Fundamental Value: Long-term investors believe in the fundamental value of the stocks they choose. For instance, Warren Buffett’s Berkshire Hathaway has held onto Coca-Cola stock for decades because he believes in the company’s brand strength and global presence.


2. Compound Growth: Holding onto investments allows for the power of compounding to work its magic. Continuous reinvestment of dividends and capital gains can significantly increase the overall value of the portfolio.


3. Reduced Risk of Emotional Decisions: Long-term investors avoid making impulsive decisions based on short-term market fluctuations or emotional reactions. They remain focused on the company's underlying performance and potential for growth.


4. Tax Benefits: Long-term investors benefit from favorable tax rates on capital gains for assets held for over a year, potentially reducing the tax burden on their investment profits.



Day Trading:


1. High Transaction Costs: Day trading involves frequent buying and selling, incurring substantial transaction fees, and taxes, which can significantly erode profits.


2. Psychological Pressure: Day traders often face immense psychological pressure, needing to make quick decisions under stress. This can lead to impulsive actions and emotional trading, resulting in losses.


3. Underperformance: Studies and research indicate that most day traders struggle to consistently beat the market. A study by the University of California found that nearly 80% of day traders lose money over time, with the majority quitting within two years.



Financial Studies Comparing Day Trading and Long-Term Investing:


Studies from various sources, including finance journals and academic institutions, consistently highlight the underperformance of day traders compared to long-term investors:


- University of California Study: This study tracked day traders over a five-year period and found that, on average, only about 1% were profitable after accounting for trading costs.


- Investment Company Institute (ICI) Data: According to ICI data, investors who frequently trade their accounts tend to underperform the market by a substantial margin. Their returns are often lower compared to those who maintain a long-term investment strategy.


- S&P Dow Jones Indices Report: This report showed that the S&P 500 index outperformed the majority of actively managed funds over a 15-year period. Only a small percentage of fund managers consistently beat the index, highlighting the challenges of beating the market through frequent trading.


These findings underline the advantages of long-term investing, which is based on thorough research, patience, and a disciplined approach, over the pitfalls and risks associated with day trading.



The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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