TaketheFifth 87the path of days when thinking about business and returns. How far
will vary with the person’s age and needs, but a minimum time frame
for anyone serious about investing is four years—and way longer for
most of us.
It is customary to call people with a long-term view “long-term
investors” and to say that such investors adopt a “buy-and-hold”
strategy. Apart from using redundant vocabulary (an investor, by def-
inition, is always dealing in the long term), these characterizations
are imprecise.
One reason to loo kat the long term is to realize that while early
investing is better, no one needs to make an investment every day
or even every year. As Warren Buffett says, using a baseball analogy,
there is no such thing as a called strike in investing—no penalty for
sitting bac kand waiting for your pitch to come in. If a characteri-
zation of this style of view is necessary, it is more apt to call it the
“wait-and-see” approach than the “buy-and-hold” approach.
Either of these approaches, however, is superior to the promis-
cuous practices of speculative traders. It is true, to an extent, that
today’s rookie companies are tomorrow’s classics, but it is false, to
a fault, that day traders and their il kact on this insight. The average
holding period for the top 50 Nasdaq stocks in late 1999 was less
than 30 days, and for Nasdaq stocks as a whole it was about 150
days (compared to about 730 days in the late 1980s).^19 That kind of
turnover means the speculators are neither picking stocks carefully
(a wait-and-see approach) nor buying them for the long term (a buy-
and-hold approach).
Keynes famously quipped that in the long run we are all dead.
But he wasn’t talking about stock picking. Keynes made that com-
ment in the context of persuading policy makers to focus on short-
term needs that could be met, he believed, only by governmental
rather than market actions. Indeed, the phrase makes no sense in
the stock-picking context, since it is always better to be rich later
than to be poor sooner and most of us will leave family survivors.
Ben Graham expressly referred to stocks when he said that in
the short run the market is a voting machine, while in the long run
it is a weighing machine. This means that the market is risky in the
short run for its wild pricing gyrations but gets relatively stable and
safer over the long run. But what does it mean to say that the market
will eventually price an asset correctly? Doesn’t it mean that the
market is sometimes correct—that it must, as Alice said in Wonder-
land, “sometimes come to jam today”? Not exactly.