Time horizon can be very confusing when determining investment strategy and decisions.
Understanding one's philosophy is most critical, particularly when attempting to avoid emotional reactions.
Just look at Netflix [ NFLX 558.395 -0.665 (-0.12%) ]; a disaster a year ago and suddenly now a roaring success. How do you make sense of these types of stories? Time and price is the key.
Long vs. Short
The long-term time horizon matters. The longer the time horizon, the better probability one has that an investment thesis will play out. This timeframe applies not only for individual selections but also for overall allocation and sector decisions. A longer time frame filters out the noise and emotion of the short-term.
But, one cannot ignore short-term news and movements in the market. For this reason, shorter term inputs matter. Look at Dow [ DOW 51.12 +0.12 (+0.24%) ]; the company missed earnings but is that likely a long term view? Or is it perhaps a shorter term headwind facing the company? You need to make that determination.
But remember, shorter term tactical adjustments for many institutional managers are more about shifts rather than a drastic repositioning; adjustments tend to be incremental.
(Read More: Netflix's 'House of Cards' Binge Strategy )
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