What is “Long-Term” in Investing.

I hear a lot of questions lately about what is considered to be “long-term” when considering an investment. Some commentators think that two to three years is “long-term.” Others may view three to five years as being adequately “long-term.” To my way of thinking, an investment is just getting warmed up in such short periods of time.

I view long-term as 12-15 years. To my way of thinking, we will continue to need the following commodities for the long term: petroleum, aluminum, steel, uranium, copper, and wood, amongst a host of others. I am not very excited about lithium, independent of what the current administration in Washington thinks. Thus, I currently have very long positions in AA, NUE, and WY. Soon, I will take a very long position in each of BHP and FCX. Also, I am very long BP, COP, XOM, MPC, MRO; and will soon take positions in OXY and HES. On the boring side, I am long EXC and ED. On the slightly not boring side, I am medium-term CIM and NLY.

To moderate the effects of both an up market and a down market, I use a very disciplined approach. I know the exact amount of money that I will put into the market each year. I divide that amount by 12, which gives me the amount that I can put in each month. Also, I divide the monthly amount by (N+1), where N is the number of companies that I currently own and the one indicates that I may decide to purchase shares of one company on my watch list. On a monthly basis, then, I allocate the available money according to the following scheme: (1) I buy more shares in each of the companies that I already own, but only if the fundamentals are favourable such as COP is currently; (2) if the funds that were to be allocated are not invested in the current month, I hold the allotment intended for that company until the next month; (3) if one of the companies on my watch list has transitioned into the “vavorable” column based upon fundamentals, then I will initiate a position in that particular company; (4) a company does not make it to the watch list unless it pays a dividend.

The short-term fluctuations in the overall market, then, have absolutely no influence on the long-term results obtained using this scheme. Two further rules need to be mentioned: (1) even the high-dividend stocks are subject to the aforementioned set of rules; and (2) DRIPs are mandatory for all stocks.

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