Growing Your Investment Garden
There are many ways to view your investment portfolio. My personal favourite visualization is to view it as being like a garden.
The most beautiful gardens I have ever seen all have big, beautiful trees and luscious vibrant flowers. Most importantly in these beautiful gardens is the absence of weeds!
The famously high performing manager of the Magellan Fund Peter Lynch said in his famous (and in my mind required reading for investors) book “One Up On Wall Street” that “Selling your winners and holding your losers is like cutting the flowers and watering the weeds.”
This quote was deemed so appropriate to describe investing that none other than the great Warren Buffett actually called Lynch to get permission to use the quote in his 1989 shareholder letter for Berkshire Hathaway.
I feel this is particularly relevant as markets are sitting up towards all time highs once again. Many investors are considering selling out of their high performing assets and continuing to hold some of their weaker performers.
This is a sound strategy, if and only if, the underlying financial position and underlying business performance is likely to be strong. As you all know, I have a strong affinity for buying assets when they are trading at a cheap price. However, it is important to note that when the situation changes, the underlying investment thesis has broken or the company fails to deliver upon it’s promises it might be time to cut the weeds from your garden.
As I have said many times, when I purchase assets my ideal holding period is forever. The last thing I want to do is sell an amazing asset/company/property just because in the short term it appears to be a little expensive or overvalued.
Over time I can’t wait to see the beautiful garden that your investment portfolio will become.