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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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You’re better off holding on

Posted by Muthu on November 2, 2016

We always keep saying that once you buy right, the best thing is to stay the course. We also repeatedly point out that the ride would be very bumpy but the reward is worth the effort.

I’m currently reading Chris Mayer’s book, 100 baggers. I want to share a small passage from it.

“The list of reasons to sell is always long. But if you’ve done the job of picking right, you’re better off holding on.

This reminds me of an anecdote by Chris Mittleman, an exceptional investor, published in one of his shareholder letters. An excerpt appeared in Value Investor Insight. Savor this:

Imagine if a friend had introduced you to Warren Buffett in 1972 and told you, “I’ve made a fortune investing with this Buffett guy over the past ten years, you must invest with him.” So you check out Warren Buffett and find that his investment vehicle, Berkshire Hathaway, had indeed been an outstanding performer, rising from about $8 in 1962 to $80 at the end of 1972.

Impressed, you bought the stock at $80 on December 31, 1972. Three years later,on December 31, 1975, it was $38, a 53% drop over a period in which the S&P 500 was down only 14%.

You might have dumped it in disgust at that point and never spoken to that friend again.Yet over the next year it rose from $38 to $94. By December 31, 1982 it was $775 and on its way to $223,615 today—a compounded annual return of 20.8% over the past 42 years.

I may print out the above and frame it.

So, anybody can do this. What you need to learn is how to buy right and then hold on. The latter sounds easy but is hard in practice.”

We also understand as to how difficult it is to practice this. So we use every interaction, communication and transaction with you to keep reinforcing this. By repeatedly saying it, we are able to internalise this trait in ourselves. Over the journey as an advisor for last 10 years, I’m also becoming a better investor, especially for the last few years. I would like to thank you for the same.

Do not worry about bear markets or temporary under performance of funds. We regularly monitor your portfolio and would suggest changes if and when required. In all other times, you are better off holding on and staying the course.

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