Otherwise you will keep hitting resistances, or keeping rotating around the pivots, or you may slip on downtrends, or you may find it hard to climb in upwards, or you may find yourself squeezed into closing triangles. In the end, you just end up waiting for somebody to throw you out of it, only to fall with loud thud.

I buy stocks with an objective to hold it forever. This, for most people, is very difficult to grasp. I started investing about nine years ago (eight of which are being buy-and-hold investor). In these eight years, I can count on my fingers how many times I have sold a given stock. Conversely, I will have to check my records to determine how many times I have purchased a stock.

My friends and acquaintances keep telling me if you never sell a stock how you will make money. You need to buy low and sell high to make money and increase your wealth. I politely ask them only one question, “You have been buying low and selling high for xx number of years. What is your wealth?” Almost every time the voice starts stammering.

To some of them, who are close and good friends, I put a proposition to them. I tell them, since your “first investment” to “as of today”, tell me honestly what has been the real percentage appreciation to your “wealth” (chuckle!). If it is more than my “wealth” appreciation (again more chuckle!), then I will transfer my entire portfolio to you. If not, then vice-a-versa. What is surprising to me is many start mental calculations; hmmm, not including tax, and transaction, ignoring commissions, not considering my subscription fees, blah blah blah…. I end my conversation there itself. Beyond that it’s a waste of time because they do not understand the meaning of total return or wealth. Discussing these two aspects is a topic in itself so I will leave this for future post. Continue reading rest of this article…