At heart, we equity investors are eternal optimists mixed with some caution. Our fundamental belief is not in blind positivity, but in resilience, growth and progress. With unwavering conviction, we understand that the future holds more promise than the past. This optimism isn’t rooted in naivety, but in a clear-eyed assessment of historical trends and economic potential.
Consider the big picture. Even in the darkest times, when markets falter and economies stutter, the underlying trend has always been growth. Businesses adapt, innovate and, ultimately, generate more wealth than before. This process, of course, could be smoother. We experience years of exuberant growth, followed by sobering corrections. The year 2020 may have proved less fruitful than 2019, and 2025 might face unforeseen challenges.
Yet, zoom out and the picture becomes clearer. With the utmost confidence that 2034 will be better than 2024, just as 2023 far surpassed the dark days of 2013. This belief transcends mere numbers on a balance sheet or fluctuations in a stock index. Take away the financial models, economic theories and mathematical gymnastics often associated with investing, and you’ll find this simple, yet powerful, belief at the heart of long-term investing. It’s not about predicting every market movement or timing every trade perfectly. Instead, it’s about recognising the underlying current of progress and positioning ourselves to ride that wave over decades, not just quarters.
This optimism doesn’t blind us to risks or dismiss short-term challenges. On the contrary, it gives us the resilience to weather storms, knowing that calmer, more prosperous seas are beyond the tempest. This balance of cautious optimism and long-term vision defines the true equity investor, separating us from mere speculators or short-term traders.
Stock investing can be complex, but let us remember this fundamental truth. The path of progress may wind and occasionally double back, but its general direction is forward. It is this unwavering belief in a brighter future that not only drives our investment decisions, but also contributes to the very progress we anticipate. In choosing to invest, we become part of the same growth that will generate returns for our investments; it’s a virtuous, self-reinforcing cycle.Therefore, it’s obvious that what we do has two stages. We believe, as optimists, that there will be growth and more prosperity. On the basis of this, we have to choose for ourselves the best investments that can benefit from that. It is not necessary to be able to foretell what will happen. Sometimes, when I discuss long-term investing with investors, they come up with objections, demanding to know the predicted EPS of a company at the time, the GDP growth, the oil prices, and so on.The investors who feel that investing is about predicting EPS and GDP have a different set of problems. People like us need faith that the world will grow and a rough sense of the companies that are run well. That’s enough.
The Author is CEO, VALUE RESEARCH
