Long-term investing: Master the art of doing nothing


I met a long-time reader of finweek recently. He is a self-confessed “old-timer” who’s been investing locally since the 1970s. 

He commented to me that the hardest lesson he has had to learn is that sometimes it’s best simply to do nothing. 

He added that this lesson still serves him well as he continues to manage his portfolio.  

I think this is absolutely true. The art of doing nothing is important. Yet it is very hard to do.  

When we start on our investing journey, we’re learning and absorbing information consistently. 

Hopefully, we’re also having fun as we progress. In truth, we never stop learning. (Although the rate of learning certainly slows at some point.)   

But the problem is the never-ending barrage of information that has intensified in recent years.  

It is not just the bi-annual release of results from companies. 

We also have live prices giving us constant feedback, as well as expert opinions, social media and the media generally all trying to interrupt us as we strive to do nothing, tempting us to react and transact. 

The market is trying to suck us into action when our best response is nearly always to take no action.

Sure, results are important, and we need to read them. But you do not need to be the first person to read them. 

The above mentioned investor says he only ever reads results on the weekend when he can sit quietly with a printed copy and study them at his leisure. 

He is refusing to be pushed into making knee-jerk responses.  

His comment on share prices was equally illuminating, he said he checks on the prices of his investments a few times a quarter at most. 

The exception here is when he is buying – then he does keep a closer eye on the market. 

He uses SMS alerts from his stockbroker for certain price levels at which he may want to buy more of a specific stock. 

Other than that, price is of little concern to him as a long-term investor.  

How to master the art of doing nothing:  

- Accept that investing really is a long-term activity. Therefore, you need to think long term and not get suckered into taking actions based on short-term developments.   

Take a look at some of the star performers over the past decade or two. 

The share prices are likely well up over the period. But if we take a closer look we’ll see periods of either flat-lining prices and at times falling prices. 

Yet, as we zoom out, we see the long-term trend working in our favour. Quality stocks don’t go up every day, every week, or even every year. 

But over decades they certainly do, and they offer inflation-beating returns that create wealth.

- Create a routine for your long-term investment portfolio. I wrote recently how I dissect a new set of results (see How to read company results in the 1 March edition or visit https://bit.ly/2FbwkNO). 

But take it a step further. When are you reading the results? I very much like the weekend idea as it offers pressure-free time. 

When do you update the investment thesis for a particular stock you either own or are interested in owning again, on the weekend is ideal.

- Know what you like about the specific company you are invested in and hence what will make you change your mind about holding it. 

I have written before about knowing the top three things that attracted you to a particular stock (https://bit.ly/2qZEmzh) and keeping this list on hand when reviewing results.

In the end, the art of doing nothing is very much the art of devising a process. 

Come up with one that helps stop you from responding in knee-jerk fashion, so you can be a mindful and successful long-term investor. 

This article originally appeared in the 10 May edition of finweek. Buy and download the magazine here, or sign up for our weekly newsletter here.

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