Long-Term
AI is volatile and narrative-driven. Below are six time-tested long-term principles, each with a concrete way to apply it to AI investing.
Circle of competence: invest in what you understand
Only bet where you can explain the business model and competitive landscape. Depth of understanding is what lets you hold through volatility.
AI · With AI, first separate compute vs. infrastructure vs. applications vs. energy — each layer has a very different moat and risk profile.
Moats: look for durable competitive advantage
Durable high returns come from advantages that are hard to copy: network effects, switching costs, scale, proprietary data, or ecosystem lock-in.
AI · Beware moat-less “wrapper” apps; favor companies that own distribution, proprietary data, or a full-stack position.
Valuation discipline: a great company still needs a fair price
The price you pay for growth determines your return. Even a great story can pre-spend years of future gains if bought too dear.
AI · Rich valuations make AI leaders acutely sensitive to any slowdown; keep a margin of safety and avoid going all-in at peak euphoria.
Time in the market, not timing the market
Compounding needs time. Frequent timing tends to underperform staying invested, while adding costs and decision errors.
AI · If you believe AI is a decade-long trend, size positions for a decade; use dollar-cost averaging to smooth entries instead of chasing.
Diversify & size positions: survive to compound
No one knows which AI name will win. Cap single-position size so no single mistake is fatal.
AI · Use a core-plus-satellite approach: core in broad index or platform leaders, small satellites for high-beta themes.
Ignore the noise: keep distance from emotion
Markets generate endless noise. Focus on whether the business fundamentals and long-term thesis still hold — not the daily price.
AI · AI is volatile and narrative-driven; predefine rules and a checklist so FOMO or panic does not drive your decisions.
Long-term checklist
- 1Can I explain in one sentence how this company makes money?
- 2What is its moat — and will it still exist in five years?
- 3Does the current valuation already pre-spend years of growth?
- 4How big is this position — and can I survive the worst case?
- 5Is my reason fundamentals — or fear of missing out?
- 6If it fell 50%, would I add, hold, or panic-sell?