It’s become almost a cliche when investors discuss a “buy and hold” strategy. The term is probably overused, and although it makes sense intuitively, I think that it does not fully encapsulate how complex investing is. Also, it under-estimates how much investors need to be involved in the active management of their portfolios, as a buy-and-hold strategy itself implies passivity to the point of being slothful.
I want to introduce a new phrase called “buy and monitor,” which I use often with my investing peers. This describes a more active, hands-on approach that I feel is better suited to the current business environment, and it also helps us watch out for risks that might arise in our holdings.
“Buy and hold” is dead?
Some investors may think the concept of buy and hold is well and truly dead, as we are living in a fast-paced, hyper-interconnected world where changes occur quickly and suddenly. There is thus no place for such a passive strategy that might encourage us to neglect the maintenance of our portfolios as companies merge, spin-off, and change directions all around us.
I believe there is still a place for buy and hold, although I admit it is increasingly becoming antiquated and outdated. However, for senior folks who have bought sturdy blue chip companies such as banks, and strong real estate investment trusts, I believe they can largely rely on buy and hold as they sail into their twilight years.
Why should we “buy and monitor”?
For younger, enterprising investors, though, “buy and monitor” might be a more appropriate phrase. We want to monitor our stocks to ensure our portfolios are optimized to include the best ideas, and that we (as investors) are constantly evaluating good opportunities to boost returns and reduce risks.
How should we monitor?
Investors should monitor news events and announcements related to the companies they own. This also includes news about the industries in which the companies are operating in. During earnings season, investors should review and assess how their companies are performing by looking through their financials and prospects.
The Foolish bottom line
Investors should take an active role in monitoring their portfolio of investments, and “buy and monitor” should be the new mantra to replace the outdated “buy and hold.” Keeping an eye on your portfolio will help give you confidence that your money is working for you, compounding your wealth over the long term.
There are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.