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Analyze Trends, Not Events

Analyze Trends, Not Events

Contents

INTROThe Concept of TimeShort-Term Trends SuckHow to See the Big PictureConclusion

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INTRO

People are blind. The Internet wants us to think that investing is easy. Mostly because that sells. But in reality, there is one concept where almost everyone fails: time.

And this leads to mistakes that often sink portfolios. When I say mistakes, I mean very avoidable mistakes like basing your analysis on short-term trends.

Let me show you how to steer clear of this.

The Concept of Time

We’re wired to live in the moment, not looking ahead or behind. I believe that has been stuck in our system since the bygone ages, where the only problem was finding food.

But times change, and so must we. Especially when it comes to investing where the past and the future are often more important than the present.

Why? Because you need to invest in companies with a bright future. And you need to do your research based on past trends (including other things).

Bloomberg cites how investors and investment professionals need to leverage trends to navigate volatile market conditions and best make sound investment decisions.

This is where most investors fail.

Short-Term Trends Suck

Temptation is dangerous.

How many times have you read about “the next big investment” or “stocks you need to buy”? These are common topics in the media world. Mostly because people are hungry for easy money. But here is the thing. All these articles are based on short-term trends.

Here are a few examples of how we usually think.

·        Carvana just doubled sales in a year. Maybe I should buy.

·        Tesla just boosted production. I need to get in on this.

·        Meta’s earnings were terrible. I should sell.

Just stop.

You’re analyzing events instead of trends...long-term trends.

That’s why you’re failing to beat the market. But fear not, let’s crack the code.

How to See the Big Picture

Investing is a little bit like marriage. You shouldn’t get involved with someone you barely know. So why are you still looking at 1-year events?  You should be analyzing the past 5 or 10 years. 

For all visual learners, here is a great example.

Before you get all defensive, we all make mistakes. I’ve done many ridiculous things in my early years. But then again, that’s why I’m here today.

To help you.

A Simple Trick to Analyze Properly

Think of historical analysis as using a camera.  First, zoom out to capture the panoramic view—look at the broader 5 to 10-year trends.  What's the big landscape here? 

Next, zoom in to examine the finer details—the 1-year events within that larger canvas.  By toggling between these views, you're not just fixated on one snapshot; you're getting the whole album! 

This method helps you grasp the long-term story while considering the smaller, but still crucial, plot twists.

Stay smart. Don't get caught up on a short-term mentality focused on one-off event or temporary market conditions. Stay focused on long-term trends related to company fundamentals, and learn to master market cycles (see prior article on this here).

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Disclosure/Disclaimer

As a Seeking Alpha affiliate, Raising InvestorIQ earns from qualifying purchases.

Information provided on this site is based on my own personal experience, research, and analysis, and it is not to be construed as professional advice. Please conduct your own research before making any investment decisions.  I am not a professional financial advisor, stockbroker, or planner, nor am I a CPA or a CFP. The contents of this site and the resources provided are for informational and entertainment purposes only and do not constitute financial, accounting, or legal advice. The author is not liable for any losses or damages related to actions or failure to act related to the content on this website.

http://www.raisinginvestoriq.com/fundamental/analyze-trends-not-events

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