What are Long-Term Investors?

Long-term investors are investing for the long haul, hoping to build a nest egg for retirement or save for a child’s tuition. 

The stock market can be a scary place. On any given day, a piece of unexpected bad news can push a stock into a nosedive. For short-term investors, a significant drop can be catastrophic. But for long-term investors with positions in quality companies, these drops are little more than blips. 

To use a sports analogy, if a soccer team loses a game by five points, that’s a bad loss (aka big drop in your stock price). However, if they win every other game, the overall season is a winner. Over time, that one loss doesn’t seem so bad.

Sure, it can be tempting to jump from one promising stock to another every time the wind blows, but long-term investors recognize that breeze for what it is. They also recognize that more trading does not improve your returns. Holding stocks long-term does. The data and multiple studies suggest that the longer you hold your stocks, the larger the profit.

In fact, one of the most famous investors of our time, Warren Buffett, believes long-term investors have a significant advantage in the market: patience. Wait for the right time to buy, and invest only in companies that will outperform for decades. Because of market turbulence, stocks of great companies become available to trade at very cheap valuations. This doesn’t mean buy stocks and forget about them! Tracking performance is critical, and so is getting out when necessary (when your stock is overvalued or trouble is on the horizon). 

And holding stocks long-term has another benefit—dividends! Between 1930 and 2018, dividends represented nearly half of overall market returns (about 43%). But it’s only long-term investors who can truly take advantage of dividends. 

To learn more and discover how you can find the right stocks for your portfolio, download our free report, How to Find Undervalued Stocks – Plus the Benjamin Graham Approach to Value Stocks, right now.