Buy & Hold
I been holding the current 9 stocks since 2016. While there were some stocks that I have bought and sold off, most were done during 2016. There were hardly any position taken after 2017 so we can assume my portfolio as the aggregate of the 9 stocks and also it can be considered it as a buy & hold strategy with the holding period of 3.5 years.
Stocks.cafe provides the daily data of the portfolio time-weighted returns vs the STI ETF or ES3 which can be downloaded to Excel. I have plotted 2 graphs, the top is the my portfolio TII (in green) vs STI ETF (in Blue); the bottom is the difference between the 2 top lines.
The top graph first. The STI, since 2016, has moved within a window of -10% to +32%. The 2016 was quite flat; 2017 was a good year up 20%; 2018 was poor down -7%; and 2019 YTD is up 9%. The first point I want to make is if you are trying to trade during these 3.5 years which quite a lot of world events had happened. Well, you can try to hop in Feb 2016, enjoy the 2 years ride and get off in Mar 2018 and wait patiently for 9 months and get in back again around Dec 2018. Sounds simple but many will know it is not easy. When to get in, when to get out, how long to wait during in and out periods? There are just too many variables and moving parts to make sense of.
My portfolio has actually performed better in every year. In 2016, it was up 13%; 2017 up 40%; 2018 flat; and 2019 YTD is up 13%. In total, my portfolio returns 81% vs STI 25%. Can observe that the green line moves in tandem with the blue line, but the difference is that my portfolio doesn’t dropped as much but managed to recover at a faster rate. So there is a positive divergence which is shown in the bottom graph (in Orange), which is the 2nd point I want to bring up. It shows the orange line is almost a straight line with positive slope after Jan 2017. This shows that with a buy & hold strategy, I can still consistently beat the index. I didn’t try to time getting in and out, nor watch the FED decision on interest rate, nor consult charts. But I am not saying those methods don’t worked, what I am saying they are not within my circle of competency and will not work for me. I studied the businesses in-depth, paid close attention to their quarterly earnings and just ignore the rest.
My 3rd point is that last key to success is patience. On a daily basis, my portfolio “only” beats the STI 52.7% of the time. This means in 100 days, my portfolio fared worse than the STI in about 47 of those days. That doesn’t sound like world beating performance. It is just a slight edge but over a long term it will all add up, so being patience is important. I don’t see results over 1 or 2 months.
The last point is that there is a misconception that this is a passive buy, forget-it and keep forever strategy, which is not true. It may looks passive as there is little buying or selling, but there is still active work involved in analysing businesses reading and gaining knowledge. If a business fundamental has deteriorated, then the right approach is to allocate the capital to the better opportunities.
In summary, I just want to share that buy & hold with sound value investing framework in place is a strategy that works for me and I believe it can produce superior returns over the long term.