The STRIDE Blog

Why Value Investors Have Better Holidays

stride-why-value-investors-have-better-holidays-blogIt's summer holiday season for the northern hemisphere. In our droves we are heading off to relax and unwind. This is our big annual chance to recharge our batteries, to go far away so that we can come back again renewed and ready for another year. So why do we bother when so many of us spend our hard-earned breaks stressing about what might be going on at home while we're on holiday?

What you don't need is added portfolio stress: What if some stocks lose value? What if the markets dip? What if shares need to be bought or sold quickly?

The answer is - none of these matter if you're a value investor.

Life's a Beach

Recent research shows that the average holiday maker spends between three and eight hours of their much anticipated holiday worrying. And it's not just about the obvious; missing flights, poor accomodation, illness, lost luggage and growing a beer belly. 37% also waste their precious holiday stressing about returning to reality when they get home and all the things that might go wrong while they're away - including their stocks and shares losing value.

On holiday we shouldn't be worrying about anything - that's the point of taking them. Far from stressing about saving money for the future, this is the only time when it's really OK to indulge in some frivolous behaviour. Buy some back-of-the-wardrobe specials from the dude on the beach: straw hats, garish sarongs or badly carved wooden masks, or drink things that we wouldn't usually even know the name of.

You probably don't want any of those things really but it's fun to be impulsive, to haggle; after all, everyone's wearing the same hats and the guy is an enthusiastic seller. You're allowed to be silly; you're on holiday. This is your moment to buy a few crazy things without thinking too hard. Especially when you're secure in the knowledge that your portfolio back home was designed to steadily gain in value to pay for lots more holidays still to come.

You know that any losses incurred should be minor and more than compensated for by those that rise. You also know that no stocks in your portfolio were bought frivolously, on a whim, without thorough checks or under the influence of fashion or outside persuasion.

Because you are a value investor.

Always Go For Long Haul

The whole point of value investing is making long-term, low risk returns. As long as you've selected fundamentally strong businesses, bought into them at a discount and timed it well, it is extremely unlikely that anything will go wrong with your portfolios during a two or three week holiday.

If something drastic happens while you're away or you can't trust your stocks not to plummet in such a short time, you simply didn't pick them very well.

While you're getting your holiday jabs, packing travel sickness pills and suncream, it's worth giving your portfolio a quick pre-holiday health check too:

Did you buy into strong businesses that are unlikely to be too shaken by market turbulence?

Are you certain you bought at a genuinely great price?

Are you invested in businesses with economic moat deep enough for a paddle or a swim?

Did you buy stocks at the best moment or was your timing a few zones out?

Were any of your holdings a fashion statement you now regret?

Are any of your stocks 'straw hats', that you bought simply because everyone else was buying them?

This is not an arduous task if you use the right tools and, while value investors are always in it for the long haul, there is no point in holding onto a poor choice. 

The Better Your Holiday the Better Your Return

Stress tastes bitter and the last thing you want on holiday is a ruined margarita. Exchanging weak stocks for strong value holdings now, before you go away, will make everything taste that much sweeter on the beach.  If you're confident in your portfolio, you'll have one big thing less to worry about while you're away. The rewards of taking time away from work and life are well documented. But you have to really disconnect from the everyday in order to feel the benefit.

Value investors already know this which is why they do all the hard work before they select their stocks, making sure their portfolios don't need to be worried about for a couple of weeks. Sticking to their value investing principles at home means they can totally chill out on holiday, buying silly things for fun while a waiter serves them on their sun lounger, knowing their portfolios are safe and sound.

Pina colada and a sequined sombrero, anyone?

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Topics: Value, 3D Value Investing

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