For all those who think that ‘Buy and Hold’ is an easy investment strategy, welcome to this post. This is one of the toughest strategjes to implement.
If you think you can buy some shares that are currently being touted on Cnbc everyday and like Rip Van winkle wake up after 20 years, you are wrong. Completely wrong.
Buy and Hold assumes the following:
– you are very good at stock picking. Investing, like everything else is getting more and more difficult. So if you picked up a GMR Infra because you thought Delhi Airport is great, you would be sitting on huge losses. I am not sure if you will get a decent return over a 20 year period, especially if you have bought it at 74.
–Companies will survive over the long term: there is one big A group listed company where the employees are ripping the company apart, and the price is going to be paid by the shareholders. Obviously I am not naming them, but I have made a quick dash to the exit, and have no regrets.
-Companies are run for shareholder Net Worth Increase: this idea seems to be old fashioned these days. Companies are run for employees, ego of the Chairman, employees doing CV building, VCs wanting to show off….the shareholder has been relegated to the 5th or 6th spot. So one has to be alert when such things are happening. Did you see HUL paying MORE royalty to Unilever? It is something to be alert to.
–Regular, Continuous, Monitoring and being alert: My dad has held Hindalco since 1957 – and I am not sure whether it has beaten the index. So even companies which have survived very long, there is no reason to believe that it is a great buy and hold. Alertness to commodity cycle is important – I have done it in case of sugar, but not in case of aluminium and steel.
Irresponsible Idiots have got Buy and Hold a bad name: so many people who buy some big names ‘L and T is a good company’ or ‘Tatas are very responsible’ or ‘I always use Colgate toothpaste’ – such people are victims of ‘laziness’ not simplicity. If you cannot or will not pick stocks, please index your portfolio. I recently saw a portfolio with all well sounding names – but giving very poor returns simply because exit calls were completely ignored saying ‘it is a good company why should I sell’.
so just because you have read a little bit about Buy and Hold investing strategy, or Value Investing it does not mean it is easy to master it…be careful…
Post Footer automatically generated by Add Post Footer Plugin for wordpress.