Sunday Morning Saturday Night Coffee

This picture is from the Leper (leprosy is now called Hansen's disease) colony. You can mule down and back or go on foot. We went with the hiking option.

As we were hiking Joellyn said something about the show Fantasy Island and asked what it was about (she's never seen it). As I thought for second, I came up with the notion that the show was really about unintended consequences.

I think unintended consequences manifest themselves with some investment decision that people make too.

There is an element of making managing your own portfolio far more difficult than it needs to be. People employ very detailed trading strategies, elaborate methods of analysis or other sorts of models.

Realistically it is very difficult to adopt someone else's investment process, not impossible, but difficult.

Further, there are a lot of studies that show that active trading lags buy and hold the vast majority of the time. Clearly, no one embarks on a path of active or complex trading systems to lag the market but it happens, we all know this.

Many folks might say that in this market environment buy and hold is the wrong strategy. I think of it as buy with the intention of holding. I would love to be so right with every stock I buy for clients that they all do exactly what I hope they will and that I will never have to sell.

I recently disclosed selling long time holding Ameren. I perceived a change in the long term outlook (perception is reality right?) and decided to sell. I am very willing to sell a stock that I think might be broken or otherwise have a problem but the hope is still to hold forever.

Another type of unintended consequence comes from putting what turns out to be too much money in one part of the market. When emerging markets corrected last June I heard from a couple of readers who acknowledged having too much (this came about from previous email exchanges) in emerging markets when they did go.

If you have read this blog for a while you know that there are some themes that I am in love with yet any time I write about them I try to include how much I have exposed to those themes, moderation is very important.

One example here is Vietnam. I started out a year ago with a 1-1.5% weight, it doubled and I sold half. The theme seems like a no-brainer. Still who would want to make an outsized bet there? I certainly don't and again I think it is absurdly obvious. If I am wrong and it cuts in half I won't be financially damaged.