Hello.. I haven't been around here for quite a while, been busy and all... I'd just like to share a few thoughts
a common misconception about long term investment is that your investing on something you can reap only years after.... Some long positions can be held for as little as a year. What is usually meant when one says "long term" investment is going into securities which you know are backed by sound financials and superb management, and which you know will continue to grow in years to come. Let me site an example, on page 5 of this thead (and i dont mean to gloat) , I saw AAPL was heavily being undervalued, but when i took a look at its financial(cash flow, balance sheet, etc..), I didn't find anything wrong at all. And if you took a look at the management's track record, you'd know that since 1998, sans the bubble burst of 2001, the company has been growing tremendously. And now if you took a look at its chart now, you'd see its trading at 130ish that's about 70% in 5 months if you sold now. But that was not really my first intention in going long on this security, I know that in the coming years, unless of course some great catastrophe happens (God forbid a world war happens), apple's management is going to deliver, and even in the event of a financial crisis it can survive because it has sound financials.
Also, the difference between an investment and a gamble is that on investments, you have knowledge over the outcome. You know where to put your money because you did the due diligence, you know you have a slight chance of loosing if anything untoward happens. Much like the difference between betting 1000 on a basketball game, and loaning 1000 with interest to a fishball vendor who needs more capital because he cant keep up with the demand. Huge difference, yes?
And yes you can loose alot on stocks, when you go in to something you have no idea about,and this is speculation, and to me its much worse than gambling
And as far as diversification goes, i tend to shy away from securities i know nothing about. Im a techie by nature, and i mostly go for tech securities, although I do like positions in other familiar sectors. For me diversification, is not putting placements in mining, oil, power, real estate and every sector you can think of to avoid risk of a sector tanking, your creating more of a risk for yourself when you go into something your totally clueless about. Diversification for me happens when i don't put all my investments in a single security or multiple securities that are very closely related.
Just sharing my ten cents worth
I'll be out for a few months, and will check back on this discussion, and see how you guys are doing. I wish everyone good fortune, and hope your investments will be fruitful.