Although the majority of our focus here at BigTrends.com is on technical analysis and short-term trading, we fully recognize the fact that long-term investing has its own respectable rewards. More than that, there are some important lessons about longer timeframes that even short-term traders need to learn, whether you're predominately a trader, or an investor, or both. Today I'd like to review a few of those lessons that H. Bradlee Perry highlights in his book Winning The Investment Marathon. Some of them you already know, but hopefully a few of them will enlighten you in a new way.

The book reads pretty easily. Each chapter is its own unique lesson, and each lesson is developed adequately (without being overdone). Here are a few chapter summaries that really stuck out in my mind.

Chapter 1 - What really counts in the long run? When asked to describe the stock market, most people would answer with what they see on a day by day basis. They'd say the stock market is a roller coaster, moving up and down with the news, and sometimes creating the news itself. And from a daily perspective, that's a fair assessment. But what about the long run? 'In the long run, every stock's price rises just about in direct proportion to the growth of the company's earnings and dividends'. I'd like to add my own thoughts on the topic of the long haul, but Perry actually sums it up quite completely. The counter argument might be that earnings didn't hold the market up between 2000 and 2002. That's actually true, but that's because earnings were actually starting to shrink (on a relative basis) by that time.

Chapter 11 - What do people worry about too much? Risk. This is certainly not a 'trading' concept, where risk management is half of the battle. But for investors, Perry feels that sometimes too much emphasis is on the risk involved. Obviously it's not something that should be ignored altogether, but the length of the timeframe for a portfolio is inversely related to its total risk. Most risks to multi-year portfolios are temporary, so don't allow what seems like a great deal of risk right now keep you away from companies that have solid long-term earnings, 

Chapter 16 - What are you trying to accomplish? Before making any investment decision, it's crucial that you first clearly define the goal you're trying to meet. This means that (at a minimum) you define the dollar amount you need, and the year you'll need it. Then working backwards from that goal, find the most appropriate holdings that will get you to your goal. This sounds simple enough, doesn't it? But you may be surprised at the number of investors who buy a stock bacause it 'looks good' or is 'currently undervalued'. What do you do with those stocks when they no longer look good, or are now fairly valued? Setting your objective first will keep you from getting involved in a lot of portfolio clean-up work later. You say you have multiple objectives? Fine. Set up brokerage accounts called 'college fund', 'house down payment', 'boat account', etc. By the way, setting the goals and objectives is a good practice for trading as well as investing.