Let’s face it. We are not that long-term oriented as we proclaim to be. Sure, we say we are long-term investors, and we imagine ourselves to be, but are we really?
It’s time for a test.
Hi, I’m Kolja Barghoorn from Aktien mit Kopf, a German YouTube channel discussing stocks, P2P and investing. Today I want to share my honest opinion on what it takes to become a successful long-term investor.
Reed Hastings, CEO of Netflix, once said, there are two versions of ourselves. An aspirational version, or how we would like ourselves to be, and an actual version. These two types are often quite different from another. He gave the example of which movies we like, share, and talk about versus which movies we actually watch and secretly love.
So, in reality, we may be like Smeagol (you know, that “my precious” character from The Lord of the Rings). We may think or feel one way, yet behave in another.
We think we eat and live a healthy lifestyle, but may have some severe vitamin deficiencies or caloric imbalances. We think we are productive at work, but may just as well be very efficient in managing our unproductivity.
We may think that others are irrational hypocrites, butthat we are rational, long-term investors. But when something goes wrong in a way we haven’t anticipated, our long-term thinking strategy goes overboard. Even worse, we may be under the illusion that we are still in long-term thinking mode, even though we most certainly are not. Let’s take my thesis and throw it into the p2p investing world.
Platforms such as Bondora make it easy for us to invest and diversify our portfolio; we can automate almost everything up to a point. Simply set it and forget it. And boy, what a ride it was. Everything went fine, and all was great, and then COVID-19 happened. People ran, and I mean literally ran out of their p2p-holdings. Just look at the statistics. Forums and groups on Facebook were crowded with people in a panic, seeing the entire industry’s inevitable doom and rushing to sell their investments as fast as possible. They did it despite suffering huge losses by selling their loans at huge discounts on secondary markets.
It went so far that there even had to be restrictions regarding payouts. Why do we investors always have to be protected from ourselves? This is a bit troubling, I know, but it’s the honest truth.
I mean, what exactly were we thinking from the start? That investing is sunshine and rainbows all to the time? Well, now we know it’s not. There will always be uncertainty, risks, and yes, sometimes losses too. This is an inherent part of investing and long-term means to accept this fact, integrate it into our behaviors and habits, and not run for the hills when risk starts to materialize.
Because if we do that, we harm our return and ourselves. We will not be rewarded in the long-term with passive income and all the fruits of our labor if we do not act accordingly.
We may think long-term, but we do not behave long-term. In times such as these, it is fair to say that there will always be some level of uncertainty. We need to discount this fact into our investments and even into our mindset, and then move on.
When I started with p2p investing in 2014, I, of course, had no idea how everything would pan out and how the p2p-world would look like in 2020 or 2025. But I knew that I would need some level of patience to assess the actual risk and reward mechanism of p2p loans. We all agree that these times are the real test of long-term thinking, but all too often forget to practice it.
There is more to long-term thinking than meets the eye. It is more than just lip service and patting ourselves on the back for it. There is no way around it. If we want to be rewarded, we can’t invest and divest like it’s a light switch that goes on and off. Because in the end, long-term thinking means long-term doing.
Disclaimer: The views and opinions expressed in this article are those of the guest blogger and do not necessarily reflect the official policy or position of Bondora.