“All of humanity’s problems stem from man’s inability to sit quietly in a room alone.” – Blaise Pascal

If you look at the Indian tradition and teachings of all our sages, they have emphasized on one thing “Be calm and quite”. “Doing Nothing” though seems or looks to be very easy but the potential and complexity of human brain is humongous and it is active all the time. Our sages knew about this and hence advised us to do meditation to control the urge to do something.

Modern day psychologists have done many practical wherein they have asked people to sit in a room by themselves for a period of 6 to 15 minutes without doing anything. They were asked to simply be alone in the room with their own thoughts. It turns out people have a very hard time doing this. For most people it’s nearly impossible to do nothing these days, because there are so many options available to keep us busy. The situation is same for people who invest into the stock markets.

With the ongoing bull market still going strong we’re getting to the point in the cycle where the buy and hold crowd is starting to take a few too many victory laps. Plenty of people are saying buy and hold investors will be sorry some day when markets crash or will enter into a bear trend. Many new age traders and financial gurus also advices on booking profits but stock market history taught us those who stick with their investments have created immense wealth in the long run.

It’s quite true that market declines are never easy to handle. But buy and hold as a strategy or any other strategy for that matter, dies during every bear market and somehow comes back to life with every bull market recovery. The thing is that if buy and hold didn’t “die” at some point in every cycle, it means the strategy is effective and works well for the true believers.

But people also say that buy and hold is an easy strategy because it doesn’t require the investor to do anything. On the contrary, it’s much easier to be doing something or anything, at all times, than to be a patient, buy and hold investor. Making constant changes to your portfolio can give an illusion of control. More activity gives investors the feeling that they are in control and decisions took by them can affect positive outcomes, on the contrary the results don’t prove this.

Doing nothing is one of the hardest possible decisions you can make as an investor. There is an endless fire hose of information coming at you. There are always new and exciting investment products being released by the financial marketing machine. There’s a constant stream of people making proclamations of bubbles, crashes, bear markets, double dip recessions and melt-ups. Doing nothing in the face of all this along with the market action we see and hear about on a daily basis is a huge challenge for any investor.

It’s also worth noting that it’s false to assume that buy and hold is only reserved for index funds. Buy and hold is strategy agnostic and many stock pickers that are basically buy and hold investors who make very few moves each year. It’s rare but these types of investors do still exist, and they are the ones who end up creating maximum wealth and fortunes not only for themselves but for their future generations as well.

Many quantitative strategies are more or less buy and hold investors that only rebalance their holdings once a year or so. It can’t be easy for those portfolio managers to sit tight and follow their rules when everyone else around them is trading like crazy.

As every strategy has its own merits and demerits buy and hold is also not perfect, no strategy can be. One always has to go in with their eyes wide open and set reasonable expectations with any investment philosophy. But one of the reasons that it works possibly a greater number of times is because you basically get out of your own way and do the heavy lifting by making your decisions up front.

Doing nothing is often the hardest move to make in the financial markets.

Similarly in managing stocks in your portfolio, it is often best to stay in the center and do nothing. Sitting put on your quality and research-based stocks, not trying to find the bottom & most importantly, not panicking, serves an investor better than trying to guess and time the markets.

Experts (though you should not believe them blindly) agree that investors will be better off resisting the temptation to make changes to their long-term investments simply because of short-term stock market movements. If your personal circumstances and financial goals haven’t changed, and you are still interested in being invested for the long term, then it is probably appropriate to ‘do nothing’.