I am lucky enough to have married a girl from Hawaii. Every three years or so, we fly down there to visit her parents for Christmas and New Year's, and this past winter was one of those times. On this trip, I tried an experiment: While in Hawaii, I spent those two glorious weeks without checking my portfolio. Until then, I'd never gone so much as half a day without checking those stock prices.
How did I ever survive?
What if the market closed for five years?
Warren Buffett recommends picking companies as if the market would be closed for the next several years. The Oracle of Omaha advises picking good companies that can do well over the long term and ignore the daily noise of the stock market. Witness L-3 Communications
On the other hand, I let others follow the lead of the breathless talking heads. They want you to jump in and out of your investments based on the latest news. For instance, according to the Motley Fool CAPS tracking of Jim Cramer, he was up on mining company BHP Billiton
Ignoring the razzle dazzle
I like to sleep at night knowing I'm invested in stable, growing companies along the lines of Constellation Brands
Plain and simple, finding good companies and holding through all the daily and monthly gyrations is the secret to building wealth. Constellation and Yum! Brands have both rewarded investors with 17% annual returns over the past 10 years. And these market-beating returns were made despite many downturns along the way.
Of course, I'm not promoting that you buy stock in a company, then just forget about it altogether. After all, we don't want to end up owning the next Enron. "Buy and hold" doesn't mean "buy and forget"; it just means avoiding the temptation to overanalyze our stocks or react to the daily hype. Not only will this more relaxed approach let us take advantage of the growth of our companies, it will also lead to lower frictional costs -- commissions and taxes -- that cut into our returns. It might even help our blood pressure.
Fool co-founders David and Tom Gardner take a relaxed path to investing, and advise Motley Fool Stock Advisor members to do so as well. When they recommend companies in Stock Advisor, they do so with a holding period of at least three to five years. While the brothers stay aware of their company's news as it happens, they don't jump at every event. They keep their eyes on the long-term prize.
For instance, Activision
Relaxed, Hawaiian-style investing like that has let the brothers beat the S&P 500 index by more than 38 points since the newsletter's inception. You can try Stock Advisor for 30 days -- for free. You may never want to move back to the frenetic mainland.
This article was originally published on Feb. 17, 2007. It has been updated.
Fool contributor Jim Mueller enjoyed his two weeks of relaxation, but he wasn't so sure he would survive his experiment. He doesn't own shares of any company mentioned. Take a relaxing moment to read the Fool's disclosure policy.