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Short Term Randomness, Long Term Predictability

The shorter the time frame, the greater the randomness of the market.

What do I mean?

In the long run, the performance of a company's share price will be very correlated with the earnings growth of the company itself.

However, in the short term, it is dictated by the moods of people who are betting on whether the share price will go up or down. The shorter the time frame, the more emphasis there is on trying to figure out what other market participants will do, and try to profit from that, rather than the underlying business growth of the company.

Therefore the shorter the timeframe, the greater the randomness or results, and therefore volatility. It can be done, I used to do it actively. But I find it emotionally very draining and tiring.

So. Zoom out. Take a longer term view, and allow management and the company to do its thing.

The benefit? You have more time to do the things you love whilst management is working for you!

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