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What if the secret to stock market success isn’t skill or timing, but patience? Even for investors who are just starting out, a long-term focus can turn moving share prices into opportunities.
Share prices can – and do – go down sharply and this can make investing daunting. But simply looking past the short term noise, can give investors a huge advantage from day one.
Manchester City
The Manchester City team that won the 2017-18 Premier League title is one of the greatest in history. But even they didn’t have things all their own way.
In the second week of the season, they failed to win at home against an underperforming Everton side. That’s a bad result, but anyone who started worrying them off made a big mistake.
A strong squad and an astute manager meant that supporters had nothing to worry about in the context of the season as a whole. And it’s the same in the stock market.
Any company can have a bad quarter and the stock market often overreacts when this happens. But investors can give themselves a big advantage just by avoiding this.
The big advantage
A lot of stock market participants focus on what share prices are doing in the near term. And in fairness, they have good reason to.
Fund managers have to report their results to clients each year. And since they typically charge fees for investing services, it’s important they can show consistent returns.
That means they need to find shares that are going to go up in the next few months. A stock that can double by 2030 is no good if it won’t do anything this year.
This means anyone who can put up with a few slow months has opportunities available that a lot of investors can’t consider. And this can be a huge advantage.
A FTSE 100 stock
One stock that might illustrate what I’m getting at here is Rightmove (LSE:RMV). Despite being a near-monopoly with huge profit margins, the stock is down 33% in the last six months.
Why? The company announced in its most recent report that earnings growth is going to be slower over the next couple of years as it integrates artificial intelligence (AI) into its platform.
There’s a real question of whether AI is a threat or an opportunity for Rightmove. But the stock market’s reaction to the firm’s update looks like investors focusing on the near future.
From a long-term perspective, though, things look interesting. If the business can maintain its competitive position, the stock could be a lot higher when the immediate spending subsides.
Getting started
Anyone who started doubting Manchester City’s 2017-18 title credentials after a 1-1 draw with Everton made a big mistake. And the stock market is full of people who do this.
This is how I see the situation with Rightmove shares at the moment. So I think there’s a real opportunity for investors who can look past the short-term noise to consider.
Ultimately, whether it’s the Premier League or the stock market, quality wins out over time. And focusing on this is the easiest way for new investors to give themselves a big head start.
