I’ve posted Entry #140 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Stocks Will Be Insanely Overpriced and Insanely Underpriced at Least Once in Your Lifetime.
Juicy Excerpt: Say that you want to determine whether a particular football coach is a good choice for the job or not. You see how he does the first year after he is hired. Perhaps you conclude that the won-loss record he achieves in a single year is not conclusive enough evidence and you give him a second chance. Perhaps there are particular circumstances that come into play that cause you to tolerate two years of poor performance before making a move. But it is unlikely that you would stick with a football coach with a poor record for more than three years. After three years, you are looking to cut your losses and move on.
So it is with a job. You don’t stay at a job that you do not find fulfilling if things do not turn around in a few years. If you watch a new television show two or three times and find it unsatisfying, you go looking for something else. A diet that doesn’t produce results in six months is a diet that failed.
But the only investing strategies that really work are long-term investing strategies. And in the field of investing the term “long-term” can be a good number of years.