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Aggressively Laid Back Investing

Posted on: Wednesday, October 5, 2016

An independent craft brewery in my home state of Connecticut manufactures and markets its lineup of tasty ales governed by the motto “aggressively laid-back.” With this philosophy, Stony Creek Brewery creates beers that have assertive and innovative flavors, but yet are highly drinkable and well-balanced.

This slogan, at first glance apparently oxymoronic, actually makes sense as you sip one of their brews, all easily distinguishable from the pale yellow mass-market beers nearly always served up by multi-national brewery conglomerates these days.

It strikes me that this slogan also applies quite well to the portfolio management and stock selection techniques used in the Small-Cap Informer. Based on the precepts of the BetterInvesting organization, our approach to the market could well be described as “aggressively laid-back investing.”

Among our standard operating procedures are the following:

We don’t react to market turbulence or global emergencies with any sense of panic or driving need to make adjustments to our portfolios.

We don’t respond to sharp drops or abrupt gains in the prices of stocks that we own with any need to make immediate buys or sells.

We sit on our hands when others in the market are losing their heads.

We don’t change course when the Federal Reserve raises or lowers interest rates.

We don’t use different principles of stock selection during bull and bear markets.

We are patient but try not to be stubborn.

We observe all that is going on, but know how to distinguish the “noise” from meaningful financial information being beamed at us 24 hours a day.

In the webinar I recently presented for our StockCentral.com subscribers entitled “Dumbest Mistakes that Investors Make—And How to Avoid Them,” I referred to an article by Jason Zweig in Money magazine in which he explained how people who kept up with the news about their stocks earned lower returns than those who paid almost no attention.

How is it that we can sit on our hands when so many other market players are preaching the necessity of taking action?

As students of the history of the market, we know that in five years, we will likely be well past any bear market or recession and onto new market highs and continued economic growth.

Maintaining this long-term focus allows us the freedom to watch the actions of so many investors and financial professionals from a distance. We’d be amused if we weren’t so often shocked at how often individuals and their advisors take actions that run counter to their own interests and cost them valuable returns over the course of their investing lifetimes.

- DOUGLAS GERLACH

 

Comments

  • Craig jacobsen
    10/6/2016 2:28 PM

    Good reminder, Doug. Thanks. I think we all need to keep our focus 5 years out and not 5 days or 5 months out. I am really trying to exercise patience right now. Since January 2015 I have been keeping a spreadsheet of my buys and sells. My buys (good companies like Air Lease, Signature Bank, IPGP, Gilead and others)are mostly underwater. But I am maintaining a long term focus. Sometimes not easy to do.


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