By Drew P. Wilson, CFA
Investment Research Analyst
Whether or not you are familiar with the term “short-termism,” it most likely affects you. In my opinion, short-termism is a vicious cycle that negatively affects both the economy and many investors’ returns. I believe that there is a natural tendency toward short-termism that is further influenced by the investment environment. I will address this in a future post.
To begin, though, let’s set the context for the problem with this definition from FCLT Global:
“Too many investors continue to seek returns on their strategies as quickly as possible. Companies are missing out on profitable investments for fear of missing quarterly earnings guidance. Corporate management significantly undervalues and underinvests in longer-term prospects. Savers are missing out on potential returns because stock markets are penalizing companies that make long-term investments. Society is missing out on long-term growth and innovation because of underinvestment.” *
Do you have a short- or long-term view?
* Source: FCLT Global, “A roadmap for focusing capital on the long term.” September 2016