Two Drivers of Investment Performance: What You Invest In, and When You Buy, Hold, and Sell

Two Drivers of Investment Performance: What You Invest In, and When You Buy, Hold, and Sell Two things affect investment performance. First, whether you invest in good teams and outstanding companies: investment selection. Second, buy, hold, and sell. This is no easier than the first. Sometimes we become excessively preoccupied with the initial price—1, 2, or 5. But if the company really can sustain rapid growth over the long term and has a wide economic moat, the entry price is often relatively unimportant, contributing the least to the eventual outcome. What has a greater effect on performance instead is the holding period and the timing of the sale. Selling too early or too late is often the key determinant of performance. Sometimes, however, a fund’s finite life creates pressure to sell and exit even when you would otherwise prefer not to.