Buy Right And Sit Tight How Right Is That?

One thumb rule, promoted by most investment consultants, is the buy right and sit tight strategy. In the long term, this will help you create good wealth. However, there are various drawbacks of this strategy such as there is no consistent winner among various asset classes like equity, debt and gold. This article takes a close look at the fallacies of this strategy and suggests an alternative option

You may have heard from investment gurus and financial planners that investors need to be disciplined and should invest from a long-term perspective. In short, they suggest a ‘buy and hold’ strategy. And though disciplined investing is something that we too are in favour of, we have our doubts about the buy and hold strategy. Having said that, a genuine question pops up which is that when the future is unknown and uncertain, how one can state for sure whether to buy, hold or sell a particular stock, index or mutual fund?

Of course, we can just come out with a probable situation but cannot predict it. This is the question that led us to analyse and understand whether or not at all the ‘buy right and sit tight’ is a prudent investment strategy, in particular for mutual funds considering that they are promoted more as long-term investments than stocks. It is equally important then to know if there exists a viable alternative.

Buy Right and Sit Tight

To begin with, let us understand what is the buy right and sit tight strategy is all about. As the phrase itself suggests, it is a strategy wherein you identify a stock or a mutual fund, invest in it and then forget it. According to this strategy, a quality stock or a mutual fund would always provide you with better returns in the long term. Consider the illustration alongside to understand this better. As an example, let us assume that you invest Rs 1 lakh in S & P BSE Sensex in November 2000 and forget about it till October 2020.