WHY THE RULES FOR BUYING VS. HOLDING A STOCK ARE NOT THE SAME

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The first thing to ask is whether the business is delivering what you envisaged. Here it’s important to not measure this performance every quarter. This is another mistake many analysts make. They look at performance every quarter. Why do they do it? Well, the key reason is that the information is there. That’s an illustration of availability bias. But you don’t have to use the information that is there because that information may be noise.

Imagine, for example, that companies were required to provide, not just quarterly performance numbers but also monthly ones. Indeed, let’s take it to the extreme and imagine that you had available daily performance numbers? How important would those numbers be? I would argue they would be close to useless. More data does not result in more insights. Often, it results in bad judgments.

You really have to train yourself to observe if, by and large, the business is delivering performance in line with your long-term projections. Some slippages must be tolerated. Some mis-allocation of capital decisions must be tolerated too. The approach is similar to Ben Franklin’s advice that you should “keep your eyes wide open before marriage, half shut afterwards.”

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https://fundooprofessor.wordpress.com/2015/03/30/buying-vs-holding/