Buy and Holding Becomes “Buy and Forget”

We all remember the old adage regarding investing, Buy and Hold. The theory is that you just buy good companies and hold onto them forever. Unfortunately, what happens many times is “hold” turns into “forget”. The buy and hold concept also assumed that you adjust and reallocate your portfolio from time to time. However, most people don’t and in many cases they don’t even know how to. Adjust or reallocate means selling under-performers and adding new opportunities.

Advisors use to suggest that you reallocate your investments on an annual basis.  This however may not make sense, what is so special about any single anniversary date?

So what should you do? My suggestion is to do an extensive review and adjustment to your portfolio on a quarterly basis. Stop putting money into down-trending stocks/funds or ETF’s. For example, on January 1st this year the emerging markets (ETF: EEM) looked great, even outperforming the S&P. However by March it was tumbling and by using the “Buy and Forget” model you would be down 10% while the S&P advanced 10%, a 20% spread.

In future blog postings I’ll give you some tools and ways to better manage your investments.


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