Tata Steel’s 14-year returns at a mere 15%; Does the ‘Invest and Forget’ approach really work?

Many personal finance experts argue against the “Invest and forget” strategy citing how the power of compounding may not be effective always. 

Shubhashish, MintGenie Team
Updated25 May 2022, 02:47 PM IST
Swaying between “Invest & Forget” versus the “Buy & Sell” investment strategies
Swaying between “Invest & Forget” versus the “Buy & Sell” investment strategies(Pixabay)

There are many investors and experts who say ‘invest and forget’ is the best strategy to maximise your money over a long term period. 

The idea is simple, let compounding do the work while you do other important things in your life. However, the strategy, although successful for large part, doesn't hold true for all occasions. There are times when the markets crash and there's a 30-40% fall in stock prices. In that situation, returns on your investments will fall, too. Making it difficult for you to reach your set goals with the money. 

Let's take example of Tata Steel. Rs 1,00,000 invested in Tata Steel 14 years ago would be worth Rs 1,14,000 today. That's just 14% returns as against Sensex's 230% rise in the same time-frame. 

Although, it must be noted that multiple events like COVID and export duty on steel are a cause for Tata Steel's recent lacklustre performance, it highlights a very important point: ‘invest and forget’ doesn't always work. 

One has to constantly check their investments and make sure such unforeseen events are taken into account and necessary adjustments are made. 

Buy, wait and earn

The “invest and forget” strategy has been cited to be a safe and steady way of making capital. 

While most personal finance experts swear by Warren Buffett’s quotes and experience regarding the “Invest and Forget” strategy, the same approach may not hold ground in today’s terms.

Samir Arora, Founder & Fund Manager, Helios Capital said, “Going by Buffett’s famous quote – An investor should act as though he had a lifetime decision card with just twenty punches on it – ‘buy & forget’ does not work in the real world.”

Safeguards

What can you do to safeguard your money? Well, you can also change your allocations as you age. When you are young, the appetite to take risks is higher. That's why your investment portfolio should reflect that. However, as you age, you should ensure that your majority investments move from equity to debt. This will help in safeguarding the returns you have thus generated so far. Also, you are shielded from any economic shocks when the need for you to use the money approaches later in your life. 

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First Published:25 May 2022, 02:47 PM IST
HomeMoneyPersonal FinanceTata Steel’s 14-year returns at a mere 15%; Does the ‘Invest and Forget’ approach really work?

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