Since 1977, The Prudent Speculator (TPS) has championed a disciplined, Value-oriented approach to long-term equity investing.
Introduction
Since 1977, The Prudent Speculator (TPS) has championed a disciplined, Value-oriented approach to long-term equity investing. We believe success doesn’t come from predicting short-term moves, and instead finds its foundation in the embrace of volatility, the study of history and, perhaps most importantly, the ability to let time work its magic. The best investors remain students of the market, learning continuously and acting rationally when others are driven by emotion.
Long-Term Equity Investing Pointers
In this post, we offer five areas of interest that can help investors stay on the path to long-term success.
Learn from the Greats
Shareholder Letters: Few resources offer more insight than the writings of Warren Buffett, Howard Marks, and Peter Lynch. Their reflections remind us that temperament outweighs timing.
Investment Classics: Foundational works like The Intelligent Investor (Ben Graham) and Common Stocks and Uncommon Profits share many traits with the underlying TPS philosophy: focus on value, think independently and stay patient.
Modern Voices: We caution that many financial news media outlets are incentivized to hype whatever is happening in the short term. Importantly, it’s good business practice to keep your TV tuned in to their channel or read their minute-by-minute market updates. e near-term focus can be hazardous to your ambitions to grow your wealth over long-term wealth. Tune in selectively!
Study the Long-Term Equity Investing Data
Historical Returns: Over the past century, equities have consistently outperformed bonds and cash, rewarding investors who endured short-term declines.
Factor Research: Decades of academic evidence highlight how value, size and momentum characteristics influence returns. We invite you to check out our post on Top Free Sources for Investment Data.
Drawdowns: Bear Markets (-20% or larger drop from the preceding high point) test conviction and also create opportunity. Studying past declines helps investors keep their composure and when others languish in the depths of despair.
Case Studies of Market Cycles
Dot-Com Bubble: The late 1990s taught the importance of valuation discipline, an enduring cornerstone of the TPS philosophy.
Great Financial Crisis: Excess leverage and illiquidity magnified losses, proving once again that diversification and patience matter.
Pandemic Crash: 2020’s swift collapse and rapid rebound reinforced a lesson we’ve preached for decades: staying invested beats trying to time the market. Importantly, the lightning-fast rebound reminded investors about the perils of throwing in the towel. Many were left on the sidelines after the market hit its low point on March 23, 2020, just over a month after the prior peak.
Guard Against Cognitive Biases That Derail Long-Term Equity Investing
Overconfidence: Markets humble even seasoned professionals. The key is consistency, not clairvoyance.
Loss Aversion: Selling during volatility locks in temporary pain. As we’ve often written, compounding requires staying the course.
Herd Behavior: Independent thinking is often where the greatest rewards lie. TPS has built its legacy on contrarian discipline.
Staying Adaptable
Technological Change: Innovation reshapes industries, companies boom and bust, and leadership shifts. Over the last 48+ years investing real money, we’ve found that Value-oriented stocks reward the patient.
Global Shifts: International markets add opportunity and diversification, enhancing long-term potential. In lieu of direct international exposure, consider that many U.S.-traded and U.S.-domiciled countries have significant sales abroad.
Policy & Regulation: Interest rates, taxes and government policies can alter sentiment, but disciplined investors focus on business fundamentals rather than headlines.
Conclusion
At The Prudent Speculator, we’ve seen every type of market over nearly five decades. Our conclusion remains unchanged: long-term equity investing works. By studying the past, questioning assumptions and maintaining discipline through uncertainty, investors can improve their odds of success. Market cycles will come and go, but we’ve long hung our hat on three core tenets: patience, selection and diversification.
