A Casual Talk on Investment Timing in the Cryptocurrency World: The Boundaries of Holding Duration

Today we continue to discuss a concept related to investment time,

which is the holding time boundary.

For example, you buy a stock,

think it is undervalued,

how long do you need to hold it for the value to return? Is it a year or ten years?

Let me share my experience,

this estimate may vary slightly between China and the US,

but roughly it’s similar.

You buy a stock,

think it is undervalued,

but if it doesn’t rise in 3 to 4 years,

your judgment is likely wrong,

or the company has undergone new changes,

such as deteriorating operations, etc.

This is not just my opinion,

including Buffett’s mentor, Schloss, also says the same.

No matter how strong our circle of competence is,

we cannot be arrogant,

we all make judgment errors,

there are always things we don’t know,

over 3 to 4 years,

if this stock is truly undervalued,

other value investors should also be able to see it,

although it might be hard to find,

but eventually it will be found.

In the short term, it might go unnoticed,

which is normal,

or the stock price might plummet,

which is also normal,

but if over 3 to 4 years no one shows interest,

then you are very likely to be wrong.

So, from a probability perspective,

we are very likely to have made a mistake in our judgment.

Generally speaking,

3 to 4 years

is also the time for a stock to switch from a bull to a bear market.

When a bull market arrives,

undervalued stocks are discovered early,

because every stone will be turned over.

If it still doesn’t rise in the end,

it indicates that there is a problem with this stock,

it’s very likely something we haven’t seen,

or some information is unavailable to us,

but someone will know.

We must acknowledge our cognitive limitations,

and not be overconfident,

3 to 4 years is a reasonable timeframe.

There are more value investors in the US,

many funds are value-oriented,

so the time for value to be recognized is relatively shorter.

In China, the bear market tends to be longer,

and retail investors dominate,

so the time for value to be recognized is also relatively longer.

The reasons are these two points: one is the existence of bull and bear markets,

the other is that value investors generally discover undervalued stocks in 3-4 years,

this is an experience I’ve summarized,

everyone can try to test it.

Additionally, regarding growth stocks,

statistics show that 90% to 95% of growth companies find it difficult to sustain beyond 4 years,

this is known as the growth trap.

Growth companies,

generally, 3 to 4 years is a critical hurdle,

many companies face issues within this timeframe.

If you hold a growth stock,

and are unsure,

don’t assign it an overly high valuation.

3 to 4 years is a hurdle,

don’t buy a stock at year 3 or 4 (I’m not saying years 5 or 6 are safe),

don’t give it an excessively high valuation (buy at a high price).

Industries have cycles,

sectors also have cycles,

stocks, no matter how good, also have cycles,

the typical industry cycle is about 3 to 4 years,

even if the stock is booming,

if its industry reverses,

its performance will be affected.

The time boundary I mentioned is an experiential estimate,

not necessarily precise,

but if you have this concept,

it can help you avoid some growth traps and value traps.

If you are unfamiliar with growth traps and value traps,

you can look back,

I have a dedicated program explaining what growth traps are,

and what value traps are.

These are two common traps that often cause people to lose money when buying growth and value stocks.

Another is the transition between bull and bear markets,

the bull and bear markets themselves also have a time boundary of about 3 to 4 years.

Having this time boundary concept,

can be beneficial for your operations.

It provides practical reference for deciding whether to hold a stock and for how long.

Or whether to buy a growth stock, and if the timing is a bit late, it can also be helpful.