Wednesday, December 14, 2016

'Doing nothing' is so difficult to do

Doing nothing is one of the most difficult things for an investor to do. A portfolio is like a garden. You have taken out the weeds (as much as you can); you have seeded your garden for the hot summer that is hopefully to come and, really, how can you protect your garden from an occasional hail storm? Somethings are just beyond your control.
Your portfolio is as diversified or concentrated as you want it; you have eliminated the bad performers; by taken some losses from past mistakes (yes we all make those) you have built up a tax cushion for future capital gains. You bought value stocks to enjoy the next leg-up in the commodities market and your long-time holdings are balanced so no individual holding exceeds 5%.  Now it is waiting for the investment world to unfold – hopefully most beneficial to you. You have also cash just in case that once-in-a-life-time opportunity knocks on your door.  There are always other investment ideas coming past you but should you switch holdings just because you have nothing else to do?
No. It is the time between seeding and harvest. It is difficult to sit on your hands, clipping bond coupons and receiving dividends. What else can you do?  You may get second thoughts; things take longer than you hoped for. Sometimes just sitting there waiting for things to come your way seems make time crawl at a snail’s pace. Your fingers itch; you want to do something; after all you are a person of action and decisions, although carefully thought out, are usually easy for you to make. But… right now anything you do is not really adding any value, except waiting for the market to take off. What if? No, you are waiting for the harvest; changing things now is running the risk to make matters worse instead of better. This is the time where somethings gnaw in your belly; why are things not happening? Did you make a mistake after all?  Is there something you overlooked?
Doing nothing is oh so difficult but probably the best thing to do in many cases. Investing is not about perfection; things have only to be more often right than wrong. But… but… just let your seedlings grow and above all; cut your losses and let your profits run. If there are no losses; be a man and do NOTHING! Really, for many of us this is soooooo difficult but when things are in place, good is typically good enough. If it isn’t broke don’t fix it… that only costs money.
Once things happen they often happen fast and like a world champion you have already thought over all the scenarios and how to react if they come to be. Waiting for the ‘New Year’ is typically one of those times that you should only review your portfolio and do nothing. Just spend time with your family; relax and enjoy the holidays.  I know, you feel you should not relax, but that is why we have year-end: to do nothing and enjoy with your loved ones those last days of the year. Nobody else is working! Why should you?
Merry Christmas and a Prosperous 2017. 

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