5 Rules to Play the Long Game

Buy the business, not the stock

Never only invest in a stock but invest in the business. You are investing in a business and not just the ticket symbol of the company. Only invest in a business you understand.

In other words, before investing in a company, you should know what business the company is in.

Timing the market is futile

One thing that Warren Buffett doesn't do is to try to time the stock market. He has a very strong opinion on the price levels to buy and sell for individual shares, but he does not know if will go up or down. Majority of investors  do just the opposite and try to time the market and try to make short term investing decisions because of this.

So, never try to time the market. In fact, nobody has ever done this successfully and consistently over multiple stock market cycles.

Investing Is More Luck Than Talent

When you try to time the market, you have two critical decisions to make. First, you need to know when to buy, at or near the low point in the market. Second, you also have to accurately assess the high point in the market and sell before disaster strikes and the market tumbles.

In other words, you have to miraculously know the market’s bottom and top to cash in on your strategy of timing the market. You have to be right about both, which is just not very likely to happen.

The market can stay irrational longer than you can stay solvent

You can be right that a market or sector is overvalued or undervalued but wrong on the timing. That's essentially what economist John Maynard Keynes meant when he said

“The market can stay irrational longer than you can stay solvent."

Stock Market declines always great opportunities!

If we look back at past selloffs, crashes and bear markets they always looks like good or great buy opportunities.  However stick to fundamentals and invest in good companies with strong moats especially during difficult times and investors will be rewarded handsomely eventually as history has shown again and again.