Let me tell you a story that’s the stuff of Wall Street lore…
A long time ago, there lived two opposite investors. One lived in the city, and was obsessed with his portfolio of stocks. He would check it hourly, selling existing stocks and buying new stocks daily.
The other lived in the mountains. He cared about his portfolio, but he wasn’t obsessed with it. He would check his portfolio only when he visited the city, which was about once every few months. At that time, he would sell existing stocks and buy new stocks – but never more often than once every few months.
As the story goes, the two investors cross paths one day, talk stocks, and end up comparing portfolios. Over every time interval, the mountain trader’s portfolio significantly outperforms the city trader’s portfolio.
Now, the above story is purely fictional…
But the lesson it teaches us is very real.
The best way to generate long-term wealth in the markets is to be patient.
Business fundamentals drive stock prices, and fundamentals underlying a business very rarely change from day to day. They change over the course of months, quarters, and years.
Sure, other dynamics change daily, but 99% of those changes do not impact the core business fundamentals… And ultimately, they amount to nothing more than noise.
That’s why the city trader underperforms the mountain trader.
The city trader gets caught up in the day-to-day noise. He loses sight of what’s actually important (the long-term fundamentals). Because of that noise, he buys stocks he should avoid and he sells stocks he should keep.
But the mountain trader ignores the noise. By not even paying attention to it, he always keeps his focus on what really matters (the long-term fundamentals). He buys stocks with great long-term fundamentals, and he holds them through volatility.
This story and lesson are particularly relevant today…
Hypergrowth stocks with great long-term fundamentals are getting butchered. It’s a bloodbath. It’s painful. And many folks want to sell and run for the hills.
But that’s what the city trader would do – he’d see the bloodbath, he’d get freaked out, and he’d sell everything.
The mountain trader, meanwhile, wouldn’t even be aware of this volatility. He’d hold through the storm, so to speak.
Who would come out on top? The mountain trader, of course.
Because here’s the thing: The fundamentals always win out.
Yes. Hypergrowth stocks are getting killed right now. But have their business fundamentals changed? Not at all.
These are still world-changing innovators that are creating tremendous value.
Tesla (NASDAQ:TSLA) is still pioneering a new era of electric vehicles, solar panels, and clean energy storage solutions to help save the world from burning itself to the ground…
Shopify (NYSE:SHOP) is still empowering businesses of all shapes and sizes to be able to sell online so that they don’t all get eaten alive by Amazon…
Beyond Meat (NASDAQ:BYND) is still breaking ground on a new form of plant-based meat that will help reduce emissions and improve animal welfare…
Zoom (NASDAQ:ZM) is still connecting the world via virtual technology so that we don’t have to drive across a city (or fly halfway across the world) to “meet” with people…
These are world-changers. More than that, they are world-improvers. They are collectively on the forefront of creating a cleaner, healthier, faster, smarter, safer, and better tomorrow.
That hasn’t changed over the past month.
The only thing that has changed is that 10-Year Treasury yields rose 50 basis points and the market freaked out.
This is temporary noise. It will pass. When it does, world-changing stocks will get back to their winning ways, because the fundamentals underlying them support continued strength for the next 2, 5, 10-plus years…
That’s really just a long-winded way of saying: Don’t be the city trader.
Be the mountain trader. Ignore the noise. Focus on the fundamentals. And stick with the world-changers.
In a year, you’ll be glad you did…
Long-term, this approach will score investors big returns. But there’s one stock in particular that is the best growth stock to buy today.
This is a company that reminds me of a young Amazon. Indeed, I think buying this stock today could be like buying AMZN stock back in 1997 — before it soared thousands of percent.
Which stock am I talking about?
Click here to watch my first-ever Exponential Growth Summit to find out the name, ticker symbol, and key business details of this potential 10X stock pick.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.
The post The City Trader vs. the Mountain Trader appeared first on InvestorPlace.
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