Browse Tag by Value investing
Timeless Musings

The Art of Not Selling

1. How does a Human mind think and perceive any situation?

2. How do legendary investors like Warren Buffet and Charlie Munger approach an investment once they own it?

3. What is an ideal time horizon to hold on to an investment?

Human minds thought process:-

Evolution has biologically wired us to act and thinking short term span of attention of the human mind is very less, getting distracted is human nature and if psychologically these are the building blocks of our mental makeup in the mundane things in life, then we are prone to the same problems when it comes to long term commitments like investing.

We live in today’s modern society where instant gratification is a must, so whether it be fast food, likes on social media, instant success is what we seek. The strong burning desire to flip makes it a counterproductive proposition is something we don’t appreciate nor understand.

If a path is not working for some time we instead of giving it time we seek recourse whether it be work, relationships, or life in general. The same very concepts apply to your financial investments as well.

Legendary style of investing and subtle Art of not selling:-

No, I am not claiming sit and not look at your portfolio, study it like a hawk track it to the core, get into the depth of companies, their management, earnings, prospects, do a deep study. But after a business does well and especially you make decent money, don’t be in a hurry to sell. Warren Buffet always says this, buying a business is making a decision, so is selling one should make the least number of decisions. He gives a beautiful analogy of a punch card, supposes a punch card has only 20 punches and each punch means buying a stock, you can buy only 20 punches in a lifetime. If you have this perspective you shall be careful both getting in and out and that helps you compound.

So when should one sell a million-dollar question most of my customers complain about no advisor giving exit calls. Exit makes sense if you feel the business has reached a point where it has little or no scope of growth or the business might be disrupted/become obsolete.

At a cost of sounding like a broken record, I would like to reiterate the same clich├ęd words of Albert Einstein, compounding is the eighth wonder of the world”. But we don’t let it completely compound, with a fear of a prospective correction or overheating we well else we most of the time prematurely exit.

Ideal Time Horizon for Investing- Forever :-

Warren Buffet said, “One of our best holding period is forever”. Now as good as it may sound reading this you may be smirking a bit, saying works on paper and for investors like him. 

I won’t totally deny that but buying quality is absolutely imperative and it comes at a cost, Charlie Munger partner in crime of Warren Buffet at Berkshire Hathaway and a major influence on his life inspired him to think in these lines  It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price” 

Charlie Munger calls this style of Investing as Sitting on Ass Investing, sounds easy but most difficult to implement. As long as you know the business you got into will not go out of business you should not mind sitting sipping lemonade and watch your favorite Sport and let your investments compound.