Doing your own research to decide which shares to buy is hard work.
In addition to piles of reports, market updates and analyst opinions, you might also read forecasts from the Australian Bureau of Statistics (ABS), Department of Foreign Affairs and Trade (DFAT), or various relevant industry organisations.
If that wasn't enough, you have to do that whole process five or six times on different companies to find out which of the numerous healthcare (for example) companies is the one you want to buy most.
After an exhaustive search which I detailed briefly in this article, I bought shares in Lifehealthcare Group Ltd (ASX: LHC) last year for $2.14 each.
The company soon traded up to $2.51, leaving me strongly tempted to sell and run with my 14% profit.
Unlike the fiasco – my biggest investing mistake of 2014 – with Westfield Corp Ltd (ASX: WFD) however, I elected to hold and wait for improving earnings to drive the company even higher.
Sure enough, shares soon dropped to $2.06.
Inevitably the little voice in my head started telling me that I got it wrong; I should have sold and claimed my profits.
My inner disciplined investor resisted however, and management at Lifehealthcare rewarded my patience this morning by announcing today that its first half 2015 unaudited earnings and net profit grew by 19.8% and 27.2% – beating the prospectus forecast by 14.3% and 19.5% respectively.
With full year growth forecast to be in the low double digits, I suspect there could be more where that came from (You can read Mike King's coverage of the update here).
It was a great reminder of why buying great companies with growing earnings and holding them for the long term will always trump short-term trading.
Holding for the long term allows the magic of compounding to grow earnings far more rapidly than taking a static profit here and there allows. Plus you also get dividends, which have the advantage of growing to be a greater initial portion of your investment over time.
Just ask Motley Fool general manager Bruce Jackson, who famously enjoys a 25% dividend from Woolworths Limited (ASX: WOW) today as a result of purchasing shares in the IPO back in the 1990s and holding them ever since.
As we get into the swing of 2015, I've noticed a few more shares in my portfolio – I'm looking at you, Yellow Brick Road Holdings Ltd (ASX: YBR) – are trading substantially below what I paid for them.
While this is quite stressful, here's what I'm going to do about it:
Nothing.
That's exactly what Warren Buffett did, when several of his shares experienced falls of 20% or more while he was holding them – and we all know how he turned out.
Find out more about this billionaire's investing style in The Motley Fool's free report Two ASX Shares Warren Buffett Would Love.
