You may have heard of the concept of Long News advocated by Kirk Citron.
The basic idea of Long News is to focus on news stories that might still be relevant fifty years, one hundred years, even ten thousand years from now. You can find more information and examples on the Long Now Foundation blog.
We do not have investing ambitions with 10,000 year horizons. However, we do believe that the basic idea of Long News can be usefully applied to investing.
Every time we read a news item, article, blog, tweet, email, or any other form of information, we should ask ourselves whether this piece of news will still be important in 5 to 10 years time.
Below is an example of headlines taken from the Business Section of the Sydney Morning Herald on 20th April 2012:
Woolies share falls- third quarter sales, slowest rate of growth in a decade
Markets Live: Downgrades weigh on shares
Super bounces back as markets rise
Lynas hit by Malaysian plant delays
Wet weather eating into Boral’s profits
Rinehart secrecy bid thwarted
Terms of trade soften as export prices plunge
Packer buys Foster’s former wine arm stake
Maritime union, Patrick settle pay dispute
BHP last aboard China exchange
How many of the above news item will be important to investors in 5 years? Sure, the articles may be useful for employees, customers, suppliers and other interested parties for whom the short term does have relevance – for jobs, sales orders and deliveries, for example. For investors, they are at best irrelevant, and at worst a distraction that leads to poorer investment decisions
We aim to invest for the long term – eschewing the difficult (and arguably impossible) task of reliably attempting to profit from trading on short-term news and price movements.
The last news item may be of some relevance in the long term, and will prompt readers to consider the impact of a trading network controlled by China. Surely a much better intellectual exercise than to worry about short term wet weather fluctuations on Boral.
By taking a moment to reflect, we avoid our instinctive bias towards hasty action. The ‘do something’ part of all of us is the great destroyer of investing profits, to the benefit of brokers and the tax man. We reduce stress in our lives when we can quickly discard or ignore irrelevant information. An uncluttered mind fosters better decision-making, not just in investing, but in our lives generally.
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- Woolworths: Third quarter sales soft
- Why Australian retailers didn’t sleep well last night
- Asian expansion – the big bank edition
Motley Fool contributor Peter Phan does not own any of the shares listed in this article. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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