Buy and Forget: The Minimal-Effort Investment Philosophy

Most of the extremely successful investors are long term investors like Warren Buffett, Peter Lynch and Fong Siling (Cold Eye) to name a few. They buy and hold stocks for the long term.

Warren Buffett holds stocks for an average of four to five years (according to data that I am unable to retrieve for the moment). However, everyone knows that his favourite holding period is forever.

Our favorite holding period is forever. – Warren Buffett

Peter Lynch mentioned in his book One Up On Wall Street that most of his big winners take three to ten years or more to play out.

Fong Siling too is a major proponent of long term investing and he made it very clear in all his books and writings and talks.

There is no doubt that going long term is the right choice when investing instead of going short term or speculating. Going long term means you are going for the biggest profits instead of quick tiny profits that do not last long.

Going long term also means buy-and-hold. You buy a stock and hold it for as long as it is generating profit for you. You don’t sell unless something goes wrong with the company’s fundamental.

Buy and hold is a simple concept. However, I am not satisfied with it because the “hold” signals that there is extra effort needed.

Buy and Forget

I have another idea: Buy and forget. This strategy is more relaxing.

By replacing the word “hold” with “forget”, you remove one dimension of consideration out of the investing equation: you no longer need to worry about the “selling” decisions. You only have to worry about half of the equation: what to buy. This can cut down a lot of investing effort.

This also means that you can do your investment homework only once that is valid for life. You make your buying decisions once. Instead of doing homework that is only valid for 1 or 2 days or even 1 or 2 minutes as in trading, you learn from Buffett where you look for a business: “where you have to be smart only once instead of being smart forever.” It is easier to be smart once rather than to be smart forever, right? One smart choice, and you will be good forever instead of the other way around.

If you keep buying and selling, buying and selling, you would need to be smart most of the time to make money. I wish you good luck for that. Whereas if you keep buying and forgetting, you would only need to be smart once to be very well of at the end.

Call that extreme lazy investor. I am that lazy. But it serves me well by having better odd of success in investing. Or a better word for lazy is patient. I can use the time that I am not actively involved in the markets by doing other things that matter the most to me in life. Although investing is important, I don’t want it to be the only thing in my life. I am greedy, as well as lazy.

The key is therefore to remember to forget after buying a specific company. By remembering to forget, you have mastered the gist of buy and forget investment philosophy. This is easy to achieve if you stay away from the market. Since as far back as 1885, psychologists have been plotting “forgetting curves” that illustrate just how fast we forget. We lose 70 % of what we just heard or read. So you get the idea.

Businesses can last forever

Businesses can last forever. Especially the good businesses. That is what I believe.

Just look for humble business that are available around you: the honest, disciplined and frugal kedai runcit that survived and thrive till this day. It is a small but profitable business that allows the owner to feed a whole family and even send all the kids to university. In the end, each kid becomes independent and generates new income on their own. That is explosive growth from the way I see it.

It makes sense for me to adopt the minimal-effort investment philosophy: buy and forget because time is the friend of the wonderful company, the enemy of the mediocre. You don’t have to worry about wonderful company because it will take very good care of itself. What this means is that if you have to worry about the business that you are buying, it is not a good business to begin with after all.

Time is the friend of the wonderful company, the enemy of the mediocre. – Warren Buffett

In order to implement the buy and forget investment philosophy, you would need to have free cash to invest. My idea is that people can only have more money in the future if they don’t need the money now. How? You need to figure this one out yourself. According to scientific findings, things that you put in effort to find out yourself will stick with you longer.

People can only have more money in the future if they don’t need the money now. – Chok Leong

Examples from my own experience

I started the buy and forget investment experiments since 2013. Here are some of the best results:

HAPSENG (3034) since 2013

HAPSENG (3034) since 2013

I bought HAPSENG (3034) since 28 May 2013. After 36 months, the stock price moves from RM 1.81 to RM 7.65. It is a 322.65 % movement.

LIIHEN (7089) since 2013

LIIHEN (7089) since 2013

I bought LIIHEN (7089) since 3 September 2013. After 33 months, the stock price moves from RM 0.447 (split-adjusted) to RM 3.35. It is a 649.44 % movement.

Of course, there are losers. The worst performer is ZHULIAN (5131) which is down 53 %.

Note: I don’t even include dividend incomes in the above calculation.

You can do the math and see if buy and forget is worth your attention. Best performer: + 649.44 %. Worst performer: – 53 %. The downside is limited but the upside is unlimited.

The risk is low because all the stocks I bought pay dividends. Even if the best performing stock returns back to it original buying price, I still gain something. The margin of safety is HUGE.

The worst case is for all the companies to go belly up. What is the odd? If that is the case, then there is something wrong with the country’s economy. We all should migrate.

The essence

You can have more money if you don’t need the money now.

You can have more money by investing the money you don’t need now.

You can adopt the least effort investment philosophy: buy and forget if you are too busy to keep up with your portfolio by doing it right at the beginning.

As Peter Lynch said, you don’t have to have 10 winning stocks out of 10 to make money in the market. 6 winnings stocks out of 10 are enough to generate decent returns. I can use the above experiment results to back that up.

Are you ready to buy and forget? Sometimes, a small step can change your life.

Be A Smart Investor

What is the key ingredient to become successful? Based on my opinion, it is discipline. It is the discipline to consistently make the right choice that separates a successful person from the rest.

The right choice is not hard to make if you are discipline enough to continually learn and update yourself. In fact, all the successful persons are merely doing simple things exceptionally well. That need discipline.

Excellence is doing ordinary things extraordinarily well. – John W. Gardner

The other word for discipline is grit. Grit is more important than IQ. It suggests a growth mindset. Grittiness is therefore a better predictor of success.

How to become successful and rich?

By being a disciplined investor.

Being an employee alone can’t make you rich. But creating a business is hard work and the failure rate is high. Only investing can make you wealthy with modest income. You need to be a disciplined investor.

Investing is easier than any other jobs in the world. It is not physically demanding. What you need is to let your money work for you.

Investing is more important than your job because one day it will outgrow your salary if you do it right.

You need capital to invest. Make it a habit to invest regularly. Starting with $100 a month is very affordable. With grit, you can reach any goal.

The really good things in life are not many, you need to be disciplined to focus on the few things that matter to you the most and avoid distractions. You can afford to take your time to think slowly and thoroughly before making any investment decision.

Risk is inversely proportional to the time you spend thinking and learning on certain thing. The more time you spend learning and understanding about stocks (and business), the less risk it has.

A highly disciplined person is someone who has better control of him/herself. Thus, he/she makes fewer stupid mistakes. He/she is a happy person. If you have better control of your life, you feel happier.

Being a successful investor also means not being a speculator. Be a smart investor by not being a speculator. The shorter the time between your trades, the higher the risk.

Take the slower approach, it will be faster.

Be a smart investor. Being disciplined is a way to be a smart investor.

The Beauty of Stock Investment

Stock market is one of the world best inventions. It is a place for business owners and entrepreneurs to get funding to expand their already successful business and to fuel their innovations to make the world a better place. It accelerates the growth of great businesses.

Great businesses create the most value and make the best use of resources. The end result is stock market makes everyone richer.

It is also a place where you, as an investor, can find your best investments. It requires relatively little physical work to generate promising returns. This is what makes stock market an attractive destination for investments.

By investing in stocks, you own a piece of the prospering business. You are a business partner, together with thousands of other shareholders, for the business that is run by savvy entrepreneurs or experienced businessmen.

Usually a business owns valuable assets like properties, brand, intellectual properties, products, lands, etc that are worth a lot money. By being a shareholder, you own a part of these assets. It is similar to indirectly buying and owning lands and properties with the exception that you don’t have to manage them yourself (sweet). It is hard to buy (cheap) land nowadays, but it is relatively easy to buy (undervalued) stocks.

I always dream of starting my own business because all of the world richest men own businesses. As most people know it, running a business is very risky especially for someone who has no prior experience. Most businesses fail. However, with the help of stock market, you can be a business owner or owner of multiple businesses at the same time and also at lower risk. As a stock investor, you can get out of a business easily at the first sight of trouble. You can’t do this when you are the actual owner of the business. Worst case, you only lose what you invest in. You get the benefit of being a business owner without bearing the full risk of running a challenging business. It is sometime cheaper to own the stock than actually running the business yourself.

In fact, the more I understand the difficulty of owning and running a business, the more I appreciate stocks.

Inflation is a monster. It eats away your purchasing power. But not with stocks. Your stock investments are hedged against inflation. Businesses raise prices to cope with inflation. They are always ahead of the inflation. In other words, inflation actually protects your investment.

Plants need time to grow, so as businesses. Businesses take time to make profit. Developers take years to construct buildings before they can generate incomes, manufacturers take time to setup their factory for operation and marketing and selling, etc before they can earn. There is no way around these facts. I am not talking about days, weeks or months of hard work but years or even decades of dedicated and consistent hard work from the entrepreneurs to become successful (Entrepreneurs are grittier than the rest of us). Therefore, it is wise to go long term when investing in stock market.

You can’t produce a baby in one month by getting nine women pregnant. – Warren Buffett

$1 can turn into $2000 by investing in the right business. E.G.: if you bought Public Bank since 1967. This is the power of investing in the right business over long term to generate effortless money. The only thing you need is patience. This also means that you don’t have to be constantly checking the business everyday. Hence, you can have a lot of free time to pursue other life goals that matter to you while investing in stocks. Good businesses will take care of themselves.

Your investment return from stocks is directly related to how much the business is making. It is therefore unrealistic to expect exceptional return from the stock market if the business is losing money. Pick companies that are growing and earning more money year over year is the right way to go. It is relatively easy to pick winning stocks than to start my own winning business.

What is the best time to invest in stock market? The best time to invest is when you have the money. The amount of investment does not need to be big to get started. In fact, it does not matter whether you are poor ($ 100) or extremely rich ($ 100 million), you can still invest in the stock market. It can be the best life time hobby that you can have. A hobby that does not require too much of your attention but is still financially rewarding and fun to do.

The best time to invest is when you have the money. – John Templeton

So, do you have the money to invest in the stock market? Are you ready to make your life and those around you richer? Are you ready to change the world for the better?