Buy and Hold? or Buy and Forget?
Let’s start with a famous saying “You Should Never Outsource Your Eyes”
We now produce an illustrative conversation between a client and a portfolio Manager:
Portfolio Manager: Our investment philosophy which says ‘Buy and Hold’, to further clarify the concept internally we think it should be ‘Buy and Forget’.
Client: So, once you are invested what you do?
Portfolio Manager: We search for other better option and we keep monitoring existing investments.
By no means, we infer that we should take investment decisions based on quarterly results or current price fluctuation, but monitoring helps update developments that are taking place in the company; thereby, giving higher accuracy in near-term projections. This, in turn, helps gauge the right valuations. When you monitor businesses, you are inclined to three thought processes
- Are results meeting our investment basis;
- Results are exceeding our investment basis; or
- Change in basis of investing
Of these situations, the first two are very simple and many people do that. This will help you to avoid early profit booking or to avoid not exiting when the price is not justifying the valuation.
However, this concept of monitoring loses its place when people are losing money from the market, they actually avoid monitoring the fact sheet. Instead, they just hate the share market and pledge that they will never come to market again.
Monitoring for a layman means watching price fluctuations while for a portfolio manager it means monitoring performance, change in financials, re-shuffle at management level, etc.
At the end, a simple and small request to everyone…. keep monitoring – but take action only when there is a permanent change.
“Know what you own, and know why you own it.“
– Peter Lynch