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China’s Patient Investors

Chinese markets, like emerging markets everywhere, are volatile, and investors there are usually focused on short-term profits. And yet a long-term approach is not only possible; done properly, it can be fabulously lucrative.

BEIJING – A common sentiment among investors in China is that the best way to make money is to trade frequently, lest you end up holding the short straw. But, in my experience, buying and holding great businesses is the only way to achieve excellent returns.

Other investors often tell me that they would like to invest for the long term, but that their fiduciary duty to their clients bars them from doing so. There is some truth in this sentiment. Great long-term investments are simple in theory, but difficult to execute; they will undoubtedly test your patience and resolve, especially if you face steep interim losses.

That is why a successful long-term strategy requires the backing of investment partners who trust you and are willing to be patient. Fund managers who are under constant pressure to post profits or defend short-term results cannot afford to invest with entrepreneurs building businesses that are optimized for the next ten years, rather than for the next quarter.

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