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Working The Long Term Thru The Short Term

Jul 17, 2015 | Dr C K Narayan | Uncategorized | 1 Comment

Everywhere we go in the market, there is some message or the other about the benefits of Long term in investing, Implicit in this bombardment of this so called good advice is the message that short term is bad. We have all heard that ditty so many times that almost all of us believe it to be true. I am not disputing the value of the long term but I am raising a point against the way it is conveyed. Showing something to be negative does not increase the virtues of another thing. What is good needs to stand by itself as being good.

One of the points that I try to argue is that the long term is really just a series of short terms. Or even micro terms if you really think about it. While espousing the virtues of the long term, is anyone telling you how to deal with the micro term or the short term? Not the last time I checked. Asking me to fill it- forget it is not advice, that is just a homily. How do I forget it when I am faced with the matter every day of my life? SIP iis advocated as one of the ways. Now that makes some sense at least. It makes you do something in the short term that is taking care of the long term! Therein lies the trick. Doing something in the short term so that you can take care of the long term. If we can master that, then we have this short term- long term or investing-trading business licked!!

How about a resolve to end the day positive? Or the week? Or the month? That can be something to work towards right? It gives you something specific to do. I think we need something specific to do every day, every week so that we remain focused on the main goal. Anthony Trollope, an author of high frequency, used to write 250 words every day. Thats it. He didn’t think that writing a book is a big project. He broke it down into a small portion and sustained that effort all thru. If we decide to make it every day/week/month trades should end in a profit, then our entire focus will shift towards it. We will no longer tolerate losses and will find ways and means to get out of them as soon as they show. We will begin to see profits as something that has to keep occurring on a regular basis and not as some sporadic event that we seek to grab because it is so rare! It will become a new persona altogether!

How about creating a process that tells you to do the right thing? Problem with market success is lack of processes that tells us when we are doing something wrong. We can address that thru creating processes that will prompt the right steps (even when they are inconvenient, such as enforcing stoplosses) as well as forcing us to look at our wrong steps (because they wont be part of the process at all). This is usually a method. The downside is that we have to bring ourselves to stick to the process. Therein lies the difficulty. But if we are thinking of the long term benefits, then the commitment to the larger can provide us with the motivation to produce the discipline in the smaller time frames.

These are just a couple of ways that I have mentioned. There could be more and you can probably invent some yourself! Thing is to start paying attention to the short term if we really want the benefits of the long term.



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