🧠 Don't 'Buy-and-Hold'


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  • Lesson: Our evolving investing approach
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Friends,

One of our favorite quotes about life comes from the late Maya Angelou:

"Do the best you can until you know better. Then, when you know better, do better."

It seems so simple. Young children know this inherently.

But adults don't: we get married to our ideas. When evidence surfaces to make us rethink our ideas, we look the other way. The threat to our identities is often more powerful than our fidelity to the truth.

No one is immune from this -- including us.

That doesn't mean that (eventually...painfully) we can't evolve. Take the idea of buy-and-hold investing: that's how we often describe our style of long-term investing. It's what stops us from wasting our time and money becoming day traders.

At the same time, however, we've started to wonder if that's what we should be aiming for. Perhaps a better -- more honest -- moniker would be "Buy-and-Monitor" investors.

Let's face it: we sometimes invest in companies that aren't as great as we thought. And as Maya Angelou would counsel, once we "know better", shouldn't we "do better" by parting way with those shares?

Over the past year, Stoffel has ventured into these waters -- attempting to winnow his portfolio down to 15 or less stocks. The results, thus far, are encouraging:

  • If his portfolio in early September was exactly the same as it was on January 1st, it would have returned 3% year-to-date.
  • But by selling stocks where he's lost conviction and buying ones with more conviction, his portfolio has returned over 11% year-to-date.

To be clear, this doesn't mean he doesn't invest with a long-term mindset. Over 40% of his portfolio is invested in Mercadolibre, Axon, Amazon, and Shopify. He's held all those for at least seven years (14 for Amazon).

But it does mean that instead of blindly following his original instincts, he's willing to constantly monitor whether or not a company's moat is as strong as he once thought.

The world is a dynamic place. We have to be dynamic learners to survive and thrive. Then, when we learn better, we can do better. That's a solid recipe for long-term success.

Wishing you investing success,

Brian Feroldi, Brian Stoffel, & Brian Withers

Long Term Mindset

P.S. Like our infographics? You'll love our new ebook, Valuation Explained Visually. This new ebook contains 50 infographics that demystify valuation. Click this link to knock $20 off the regular price.

One simple graphic

One piece of timeless content

Ben Carlson at Ritholtz Wealth Management LLC shares a simple graphic showing the last 31 years of stock market returns. But there's a twist: with patience, the returns are impressive no matter what year you started. Another reminder for investors that "time in the market" matters.

One resource

Have tax-free money in a 401(k) or Traditional IRA? You'll want to brush up on the new IRS rules for Required Minimum Distributions. These mandatory withdrawals have new requirements -- and stiff penalties for not following the rules.

Note: If you've consumed some great investing content recently, we'd love to hear about it! Reply to this email with the link, and we will consider it for a future newsletter with a shout-out to you!

One quote

Brian Feroldi

Brian Stoffel

Brian Withers

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Long-Term Mindset

I teach investors how to analyze businesses. Each Wednesday, I share six pieces of timeless content that can be read in less than 2 minutes. Read by 100,000+ investors from a16z, Amazon, Google, Microsoft, and more.

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