Do you hold stocks for long term? Does it work?

Value · 5 January 2011

This is my first post in this forum.

In the last 5 - 6 years I've been building my long term portfolio with stocks like BHP, RIO, the 4 Banks, WPL, WES, WOW, WDC, AMP, CCL, ORG, QBE and few other large companies.
Do you still believe in long term investment ( > 5 years) in stock market? The kind of investment you can buy and forget.
There have been few arguments that such investment strategy no longer works and one should not adopt that kind of thinking anymore.
I have to say I have questioned myself too. Especially with GFC and other crisis before that. Just to see my investment go up and down.

Another strategy that I read somewhere is to look and invest in smaller companies that are showing a lot of potential.
Invest in a dozen or so, hopefully some of them will perform very well.
In the long run you will do a lot better than holding "blue chips".
Once (you think) they've reached their full potential sell them and invest other smaller companies.
For example, rather than investing in BHP and RIO, I should invest in a dozen or so smaller companies instead (AGO, MGX etc just as examples)?

What do you think about long term investment?
Do you think the second method is a better way forward?

Market Depth · 5 January 2011

Hi Value,

I do have longer term holdings, that's how I got started. I did lose alot during the 87 crash, a small 'Blip' compared to GFC BTW. I don't believe in 'Buy and Forget' You 'Buy' and then manage your investment. Longer slower moving averages can help to smooth out the day to day 'Noise' in a stock price. There's no reason why You can't benifit from 'Shorter Term' upward swings in price. Use a portion of your long term holding to 'Sell into a rising market. The price would need to be moving away from your longer term moving average. When the price moves back towards it 'Buy' more back than you sold still leaving some profit in your pocket. Dividends and Dividend reinvestment schemes and Franking, not to mention PEG and PE multiples, Not to mention the writing of options and warrents against stock that you own. These are a complex instruments that would go beyond the scope of this thread, but well worth exploring.

skc · 5 January 2011

Value said:
This is my first post in this forum.

In the last 5 - 6 years I've been building my long term portfolio with stocks like BHP, RIO, the 4 Banks, WPL, WES, WOW, WDC, AMP, CCL, ORG, QBE and few other large companies.
Do you still believe in long term investment ( > 5 years) in stock market? The kind of investment you can buy and forget.
There have been few arguments that such investment strategy no longer works and one should not adopt that kind of thinking anymore.

Hi Value,

Have a look at this link and get your expectations rights. You can't beat the market by holding stocks that make up 80% of the market!

https://www.aussiestockforums.com/forums/showthread.php?t=21399&p=601844#post601844

burglar · 5 January 2011

Market Depth said:
Hi Value,
... I don't believe in 'Buy and Forget' You 'Buy' and then manage your investment. ...

Very good advice. In my experience 'Buy and Forget' leads to disaster !
(unless you're lucky enough to pick up a "Johnson & Johnson ")

Smurf1976 · 5 January 2011

I certainly hold some stocks for quite a while (years). But my reason for buying them is generally either to own shares in a sound company in a growing industry (eg commodity producers over the past few years) and/or because they are a likely takeover target.

The GFC was a buying opportunity in my opinion. Just like I buy things for the house when there's a 50% off sale at a shop rather than paying full price. But in both cases, the key is not buying junk...

TabJockey · 5 January 2011

As long as the company's earning are growing its good to hold. If something is, or is going to stop/slow earnings growth cash out and start again with a business with more headroom.

Blue chips are good for allot of things but capital growth is not one of them. You need a helluva bull run to get bang for you buck and then you got to get out of them before the inevitable crash.

Just read lots of Warren Buffett.

tothemax6 · 5 January 2011

Simply buying and holding large cap shares isn't a particularly good strategy. The market crashes. Buying before the 2008 crash would have hurt, after the 2008 crash would have rewarded you.
If you are looking to buy shares long term you need to look into 'value investing'. This does work (if you are good at it), as Buffet has proven by becoming the worlds richest man.

ParleVouFrancois · 5 January 2011

It works for small/medium caps, as long as you have a plan to derisk your positions (e.g. wait for a 100% gain then sell down to free carry) so that you don't ride them up and down. Or you could take your gains off the table, with the acknowledgment that the shares most probably will go up, but that you are satisfied that you've got enough profit from the share.

Imo you're probably wasting your time in the ASX 100 and I'd extend that to most of the ASX 200. Fund managers with billions to invest etc all prowl around these big companies for value, so it's getting increasingly hard to find good buys in the larger caps. I focus almost exclusively on stocks outside the ASX 200 because of this (LYC and AUT being exceptions, because they WERE outside the ASX 200 LOL).

So basically if you want to make a bit of coin (the risks are increased obviously), I'd say the small caps are where it's at. Buy and hold probably will still work for small cap companies that are going to make it big, but it's hard to find out which will, and which will flop, so always make sure to take some money off the table (invest like a coward basically ).

PVF.

So_Cynical · 5 January 2011

Value said:
Do you still believe in long term investment ( > 5 years) in stock market? The kind of investment you can buy and forget.

Yes i believe in long term investment - No its not the kind of investment you can buy and forget and it never ever was...if you want to buy and forget, go get a term deposit.

Buy and hold/forget is dead...buy and watch like a hawk is the new mantra.

Julia · 5 January 2011

Value said:
This is my first post in this forum.

In the last 5 - 6 years I've been building my long term portfolio with stocks like BHP, RIO, the 4 Banks, WPL, WES, WOW, WDC, AMP, CCL, ORG, QBE and few other large companies.
Do you still believe in long term investment ( > 5 years) in stock market? The kind of investment you can buy and forget.

Regardless of any replies you've received to the above question, what is your own conclusion about the performance of these stocks?

If you've been investing in these companies for five or six years, you've predated the GFC and should have a pretty clear result.

Imo there's no such investment as one you can 'buy and forget' except perhaps a term deposit.

There have been few arguments that such investment strategy no longer works and one should not adopt that kind of thinking anymore.
I have to say I have questioned myself too. Especially with GFC and other crisis before that. Just to see my investment go up and down.

Have you considered protecting any profits you've achieved at the start of a downturn, rather than just sitting on the sidelines watching your investment go down?

Invest in a dozen or so, hopefully some of them will perform very well.

A suggestion here: take "hope" or "hopefully" out of your investing vocabulary.
You need to have a more substantial basis for the choices you make than that.

Value · 5 January 2011

I really have to sit down and rethink my strategy.
I don't think my current portfolio will give me the return I am seeking.

http://www.nytimes.com/interactive/2...s-graphic.html
This graph is an eye opener.

Thinking loudly, I will stop buying 'blue chips' stocks and concentrate on smaller companies.
The next purchase will be on smaller companies outside ASX200 that have a very profitable business with good management.
In time I will reduce my blue chips holding to 50% of my total portfolio.
I am going to think about the increase risk (perceived or real) with smaller companies.
The difficult part is obviously identifying great companies.

I will do the transition slowly to match with my comfort level.
Thinking outside the square maybe is the only way to progress.

It is good that I found this website.
Time to do my homework (again).

Thank you everyone for the advise and opinion.
I appreciate it very much.

joea · 6 January 2011

Value said:
I really have to sit down and rethink my strategy.
I don't think my current portfolio will give me the return I am seeking.

http://www.nytimes.com/interactive/2...s-graphic.html
This graph is an eye opener.

Thinking loudly, I will stop buying 'blue chips' stocks and concentrate on smaller companies.
The next purchase will be on smaller companies outside ASX200 that have a very profitable business with good management.
In time I will reduce my blue chips holding to 50% of my total portfolio.
I am going to think about the increase risk (perceived or real) with smaller companies.
The difficult part is obviously identifying great companies.

I will do the transition slowly to match with my comfort level.
Thinking outside the square maybe is the only way to progress.

It is good that I found this website.
Time to do my homework (again).

Thank you everyone for the advise and opinion.
I appreciate it very much.

Hi
I think you should sit down and have a big think on what's going to move upwards.
If you have blue chip stocks, that fine but just because they are blue chip stock does not mean they will go up.
Get to understand the 4 stages of a stock movement.
If you still have QBE then you had better compile a trading plan. i.e. entry and exits.
There is not much sense in hanging on to a stock because it is the insurance stock in your portfolio, and if it loses considerable value because it pays a dividend.
On the bright side at least you are having a go.

Cheers p.s. i chase emerging companies myself.

TabJockey · 6 January 2011

Just because they are Blue chips does not mean they are a slow coach investment!

For example Westpac at the moment is trading at 9x earnings, pretty cheap. If you bought that today at $22 there is a good chance it will be up closer to $30 in 12 months.

That example might turn out to be wrong but big companies with minimal risk can be undervalued by the market alongside smaller companies.

Tonester · 6 January 2011

Yes, often the error of the beginning investor (definately myself included). Buying into the names you know, not for any other reason than they are big and popular.

burglar · 7 January 2011

Value said:
...
(AGO, MGX etc just as examples)? ...

Regarding companies like AGO, MGX,

If you're reading about it in the paper or you heard it from the taxi driver it is probably too late!
If you heard it from a broker, he may well be selling for another client!!

I just looked at MGX, peaked in mid November.
I would need something compelling to buy that one.

And AGO, just had a long run, the 20 point Moving Average has just peaked.
Likewise I would need to see something tangible.

Trust no-one!

DYOR.

burglar

nunthewiser · 7 January 2011

burglar said:
Regarding companies like AGO, MGX,

If you're reading about it in the paper or you heard it from the taxi driver it is probably too late!

burglar

LOL

now heres a funny tale for ya.

i heard about MGX from a taxi driver in Geraldton when they were around 11 cents WAY back in the early 2000,s
i was wondering who was building this massive green shed at the wharf that i was watching progress each day from my front porch.
i decided to look into them
i bought at 14, 17 , 21.5 and then they got smashed down to 13 and scared the crud out of me as i was overinvested capital wise in them
i bought more at 13.5 as i had done some severe digging and major research including visits to sites they were developing.
i then bought MGXO at .04
i ramped the bejesus out of them on commsec chat for years.
i watched them grow as a producing/money making company but still unloved in the SP dept compared to non producers like MMX,MIS and a cupla other non producers in the area.
i sold my first parcel at $1.00
2nd @ 2.20
3rd @ 2.90
4th when they got dumped in the gfc at around 40 cents.
i was left with still a decent parcel free carry which i continue to hold today.
i sold MGXO @ .28 .37 and converted a few others on expiry

i still continue to trade this stock regurly using zero cost averaging to build my position instead of actually taking dollar profits.

i win some , i lose some but at end of day it certainly provides a nice risk free way of trading it

That taxi driver wasnt late on that one

anyhoo , this is the internet and i wouldnt believe me either

blessim

burglar · 7 January 2011

nunthewiser said:
LOL

now heres a funny tale for ya.

i heard about MGX from a taxi driver in Geraldton when they were around 11 cents WAY back in the early 2000,s
i was wondering who was building this massive green shed at the wharf that i was watching progress each day from my front porch.
...
That taxi driver wasnt late on that one

anyhoo , this is the internet and i wouldnt believe me either

blessim

joea said:
Cheers p.s. i chase emerging companies myself.

Nun,

Don't know what I was trying to say ... exactly!
Certainly not out to slam taxi drivers in Geraldton.

I think I was trying to say, look for a newish green shed!
What joea calls an emerging company.

Love your work,
Cheers

burglar · 12 January 2011

nunthewiser said:
LOL

Now here's a funny tale for you,

I heard about GIR from a pensioner in Adelaide when they were around 10 cents WAY back in the early 2000,s

I put in an order, but bought nun, 'cos of low liquidity!
Bought DRA - Dragon at 5.6 cents instead.

Now I see GIR in takeover from AGO, rushed up to around $4.50
And DRA been up to $2.00 (sold mine dirt cheep )

Pity I didn't understand zero cost averaging, back then.

Tysonboss1 · 12 January 2011

So_Cynical said:
if you want to buy and forget, go get a term deposit.

.

Or an index fund

So_Cynical · 12 January 2011

Tysonboss1 said:
Or an index fund

I would argue that even with an index fund you should still be watching like a hawk and maximising profits by part selling tops and then timing re-entry at a discount....building free carry into the position/turning profit into capital.

Do you hold stocks for long term? Does it work?

Value

Market Depth

skc

Goldmember

burglar

Smurf1976

TabJockey

tothemax6

ParleVouFrancois

So_Cynical

The Contrarian Averager

Julia

In Memoriam

Value

joea

TabJockey

Tonester

burglar

nunthewiser

burglar

burglar

Tysonboss1

So_Cynical

The Contrarian Averager

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Do you hold stocks for long term? Does it work?

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