Hey guys it's sasha, and today i wanted to talk about a very common problem. I see in investing and this problem is this big misconception of what being a long-term investor actually means. I keep seeing a whole load of people, make the same mistakes and these mistakes will cost those investors money. So i wanted to dispel some myths and explain some really important fundamentals.

There is this notion that investors and traders have to be split into definitive categories, you're, either an investor or a trader, and you definitely have to be in one of those two camps. If you're an investor, you also have to have a sub-category you're, either a long-term investor, a growth investor, a value investor, a dividend, investor, maybe a passive investor. But you have to have a category and if you're a trader, you also have to self-certify. Are you a day trader a swing trader or a patent trader, and there is one thing that is really important: all of these are ultimately really just different flavors of exactly the same game.

We all play on the same chessboard and we all have the same objective. To get the highest possible return from the stock market, we just have very different ideas about how to achieve that objective, and there is a very passionate group of investors who are long-term, investing evangelists. This doesn't include all long-term investors by no means, i'm not saying every long-term investor falls into this, but a large number of people do - and there is this class of long-term investor, who have a specific point of view that i really wanted to discuss here and that Point of view is that long-term investors do not sell out long-term investors decide they believe in a company believe in what the company is doing where it's headed. They love everything about it and then those long-term investors go and invest in that company and the sort of idea here is that as a proper, proper long-term investor, you do not sell under any circumstances, because everything is either noise or fudd or irrelevant or whatever.

And this happens much more than you think you hear about this a lot on social media. I get comments on this all the time. I very very often get comments from people saying that they will never sell out of a stock of their favorite company because they love it. They they want to believe in this for the long term and i recently went and sold out of one of my personal favorite positions in lucid, and i got very very many comments on that because in a separate video, i also said that i see lucid as A company that may do extremely well over the next 10 years, because there's so many different factors that are on their side.

How is it possible to say good things about company on one side and believe that it will do well but then go and sell out as a long-term investor? Well, the polite version of those comments said that i don't understand a long-term investing and that i am some kind of nasty trader, so i thought i'd explain why. That way of thinking is wrong. I mean it is relatively straightforward, but i think a lot of discussion around long-term investing doesn't do a good job of covering this aspect. It doesn't matter what sort of investor you are.

Your objective is to invest in a company that you feel is undervalued for whatever reason, and then your objective is to hold on to that company. For, however long your strategy determines appropriate in order to receive a gain in whatever form. But here is the thing with investing: you only make money when you sell and not only that i know that's obvious, but with every company there has to be a point when you would sell, because if you don't have a number at which you would sell a Position, you aren't investing, you are just joining a fan. Club tesla is a very popular company at the moment that attracts a huge number of people who declare themselves to be long-term investors in this kind of evangelical way, and a popular rhetoric is that as a long-term investor, you will never ever sell your stock, no matter What, if you sell you just simply don't believe enough in the company, you don't understand where it's headed.

You are short-sighted, so all right. What if the share price, for example, for tesla instead of twelve hundred dollars, was three thousand dollars right now. Would you sell what if it was thirty thousand dollars or maybe three hundred thousand dollars? Oh wait? What was that you would sell at 300 000., see see how, when you take this kind of thinking and extrapolate it to a ridiculous point, you actually learn something. You find something very useful: that there is a price at which you would sell.

But if you are telling yourself that you will never sell a stock, what you are really saying is that you don't actually know what the price at which you sell would be, and if you don't know what that price is, then how do you know at any One point: if you should sell or not today the stock goes up 20. Should you sell, i mean, do you know because remember the price of a company's share is the present value of the expected future cash flows that that company will generate uh. I am simplifying it, maybe a little, but you know that pretty much is it uh? The price of the share that you're buying in the business is your part of the future cash flows of that company returned to the present equivalent value. So why would you hold on to something where the current price of that something is more than you would expect that thing to pay you in the future? It's a bit like going out and buying a one dollar banknote for 1.50.

It just doesn't make any sense, and here is an interesting fact with investing. Nobody knows what the market will do, maybe that one dollar banknote will go to 1.50. Maybe he'll go to two dollars, maybe you'll crash. Who knows, but here is an interesting fact, no matter how sophisticated people's models, no matter, how good their knowledge is, nobody can predict what the market will do.

The only thing we can do is to try to estimate likelihood and build our own understanding to the best of our ability of what we think the share price right now should be, and then we can compare that to the actual share price, but the market might Never catch up to our valuation because we don't know what it's going to do. There's a million reasons why the company is seen as risky. Your valuation may be wrong, maybe there's exogenous factors, macroeconomic factors or the company just simply fails to deliver or the exact opposite. Might also happen, you go and invest in a company planning to own the stock for a few years, because you've done your math and you see a 100 percent upside and you just don't expect it to come through quickly, because you know that kind of stuff doesn't Really normally happen and then that stock just goes in a massive run and gains a hundred percent in the space of just a few days.

What what do you do, then? Should you still hold because you believe in the company? Well, the answer is no. If the share price becomes equal to your target price or very, very close to it, that means that at that point you think there is no longer much upside. You bought something that you thought was worth a dollar for 50 cents, and now it costs one dollar. Now sure you could speculate and hope that the trajectory and the hype and the whatever it is will take it all the way to 1.50.

But your math at that point is telling you that this would make the price overvalued and it could happen. It may well happen, it happens all the time, but the likelihood of it happening on average across time across different companies across different scenarios reduces the higher. The share price is compared to your target price. So here is a top investing tip for you feel free to invest your money.

However, you want and feel appropriate and feel free to join whatever fan club that you want to join, but don't mix those two things up, because investing is not the same as being in a fan club. It is a cold calculated business. Nobody cares if you love the company or believe in the ceo. Nobody cares if there's a massive fun club egging each other on on twitter.

In the short term, all these things might play out a million different things can make the price dance, but in the long term, numbers generally always win, and if you invest in a few different companies, the trajectories of those companies are likely to play out differently. Some might take a long time you might hold up company for many many years waiting for the upside to materialize. As more data turns up, you might even go and reevaluate your target price and it might keep going up, giving you more and more upside over time, because the share price never catches up to your target price. You might notice this if you watch some of my videos and some of the stocks that i hold in my portfolio like, for example, amd.

I had a target price on amd when it was priced at 70 or whatever. Then new information, new data, new updates became available and i re-evaluated my target person, my personal target price for amd and i increased it and then more information came out and recently i raised it slightly again. But if the price was to shoot up for whatever reason - and you don't see a significant upside any longer, what is the point of holding on if you only think that the share price is, let's say five percent undervalued? But you think that there are other companies that maybe have a 20 or even a 50 under valuation. What is the point in parking, your money somewhere? Where you don't expect much growth? It could happen, but you don't expect it on the balance of probabilities.

The share price is likely to stay flat or maybe only grow a little bit when there are plenty of other places where you mathematically expect, on the balance of other probabilities, that the money will be put to work in a much more effective way. So don't make that mistake, even if you are a long-term investor, you always need to know at what price you would exit that position, because sometimes you don't have time to think about it. When lucid motors recently had a price of 41 dollars, for example, my tiger price was 42. I sold my position in eight different accounts in the space of a few minutes, because i already knew exactly what i would do, because i would do the exact same thing.

Every single time - and you know the share price - has dropped slightly since then. Maybe you'll go to 60 or even 100. I don't know, but i follow my strategy and i always have a price at which i would sell, and if that position triggers i go and sell. Tesla is currently my biggest single position and, if tesla's share price tomorrow, for example, was to hit two thousand nine hundred dollars against my target price of three thousand dollars.

I am going to sell out of my entire tesla position in a fraction of the of the time it took me to sell my loose position. That target price seemed absolutely ridiculous when i was talking about it when tesla was on sale for 540 earlier this year, but suddenly it doesn't seem quite so strange now that the share price has gone over twelve hundred dollars. If you found this video useful, please don't forget to smash the like button for the youtube algorithm. Thank you so much for watching.

I really really appreciate it and, as always i'll see you guys later.