The Wisdom of the Times: Long-Term Investing Ideas for Savvy Investors




You can’t beat it.

You can’t fight it.

You can’t even hope to contain it.

But it is okay. You can make time work for you.

Investing in the stock market is a matter of time, patience and perseverance. And no, I’m not talking about timing the market. As any seasoned investor will tell you, market timing is a gamble at best. The best approach is to have a long-term mindset and take your time. The more, the better. This is how you get the magic of compound growth to increase your wealth.

Time in market beats market timing. This means you must accept and endure short-term volatility in exchange for long-term gains. Lead investor Warren Buffett doesn’t even try to predict short-term market movements, because the reality is far too unpredictable. In fact, he said, “Our favorite detention period is forever.” This mindset has served him well, and it can serve you too.

Giving established giants time to prove their worth

Take Microsoft (NASDAQ: MSFT), For example. It has been around for over 40 years and has only gone from strength to strength over time. The Redmond, Wash.-based tech giant is now the second largest company in the US stock market, behind only Apple. He’s turned to cloud computing and artificial intelligence (AI), and his revamped business plan is paying off. Its smart cloud segment, where Microsoft publishes the financial results of its cloud-related business operations, has become its biggest revenue generator:

Microsoft’s Azure cloud platform is a leader in the field, and the company’s investments in AI are starting to pay off. With a solid foundation in these high-growth areas — not to mention a titanium balance sheet — Microsoft is ready to weather any short-term storms and emerge even stronger in the years to come. And its decades-long growth story isn’t over yet. Far from there.

Patience with risky ideas

But investing is not just about choosing the right company. In a larger sense, it’s really about having the right mindset. Patience and persistence are essential virtues in the stock market, and they are especially important when it comes to long-term investing.

THE netflix (NASDAQ:NFLX) story illustrates what I mean. The video streaming giant has been a stock market darling for years, but it hasn’t always been easy. The company faced a backlash in 2011 when it attempted to spin off its DVD rental business into a separate company called Qwikster. Netflix shares lost 61% of their value that year, despite a strong start. And if you bought Netflix stock cheap at the end of 2011, because you saw the revolutionary value of going global with a digital streaming service, and you’ve held on since then, I can only applaud your brilliant insight and your holy patience. . If you invested $31,000 in Netflix back then, that stake would be worth over $1 million today:

NFLX Chart

NFLX data by YCharts.

More recently, Netflix has faced increased competition from new streaming services, and it’s knee-deep in an unpredictable economy. The company lost more subscribers than it gained in both reporting periods last year, and the market’s response to these issues led it to cut its market capitalization by 51%. Netflix in 2022. But despite these challenges, management stayed the course and continued to invest in original content.

Netflix’s persistent efforts to optimize subscriber growth have shifted to a focus on profitable growth, and the money should continue to flow from now on. The company has 233 million streaming subscribers and reported free cash flow of $2.1 billion last quarter. The once unprofitable growth stock has turned into a formidable slot machine.

I can’t promise the streamer will deliver another round of massive stock price gains, but Netflix has already proven the naysayers wrong and looks likely to do it again. Patient long-term shareholders should reap handsome rewards as its cash earnings inspire higher share prices.

The beauty of diversification

Another example of an effective long-term investment is the Vanguard S&P 500 ETF (NYSEMKT: VOO)which follows the S&P500 (SNP INDEX: ^GSPC) hint. This efficiently managed fund has been around for over 10 years and has consistently delivered market-matching returns, thanks to automated portfolio balancing and extremely low management fees. I mean, you can hardly tell the difference between the results of owning this fund or (in theory, because you can’t actually do that) investing directly in the S&P 500:

VOO Chart

VOO data by YCharts.

The beauty of this investment is that you are not betting on a specific company, but rather on the overall performance of the US economy. And historically, the US economy has always rebounded from downturns and continued to grow over the long term. So it makes perfect sense to put your money to work in a broadly diversified asset like the Vanguard S&P 500 fund, which lets you manage a huge basket of stocks with the convenience of a single ticker.

Don’t forget the cryptocurrencies!

Of course, investing is no longer limited to stocks. Cryptocurrencies like Bitcoin (CRYPTO: BTC) And Peas (CRYPTO: DOT) appeared to be viable long-term investments. Bitcoin has been around for over a decade and continues to prove its worth time and time again. With a strict limit on the number of Bitcoin tokens that can exist, it is touted as the ultimate tool against long-term inflation.

And Polkadot, a new cryptocurrency that aims to provide interoperability between different blockchain networks, has the potential to disrupt the traditional financial system. In fact, Polkadot was designed by the Web3 Foundation as the perfect tool to drive the next generation of the public Internet. If you want to invest in this project, Polkadot is the most direct way to do it.

As with any investment, there are risks, but cryptocurrencies can be worth considering as part of a well-diversified portfolio for investors with long-term investment horizons. This applies to value-driven crypto investments like Bitcoin as well as more practical bets on the expectation of increasing use of blockchain networks in the mass market, which is how Polkadot should build its value in coming years.

In the end, time is your ally

In conclusion, investing is a matter of time, patience and perseverance. By taking a long-term view and standing firm in the face of short-term volatility, you can position yourself for success. Whether you choose to invest in established giants like Microsoft, up-and-coming companies like Netflix, ultra-safe S&P 500 index funds, exciting cryptocurrencies, or a combination of these options, the key is to have a strong thesis. solid investment and stick to it.

A little luck and a lot of patience will help protect and grow your wealth over time.

And here it is again: time, the long-term investor’s best friend. You didn’t hear it here first, but I don’t mind repeating this crucial idea.

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Anders Bylund has positions in Bitcoin, Netflix, Polkadot and Vanguard S&P 500 ETF. The Motley Fool has positions and recommends Bitcoin, Microsoft, Netflix and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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