Most investors have the greatest difficulty letting their investments run for long time durations. There is a tendency to interrupt a winning investment to provide liquidity for something else. Also, when an investment underperforms in the near term, there is a compelling urge to exit it and find something else.
When an investor is driven by near-term needs, considerations, and judgments, he ends up doing all the wrong things. This leads to erratic decision-making, inconsistent judgment application, and ill-reasoned moves in the portfolio. The investor needs to ensure that his own financial governance does not fail him. The important thing is to ensure that the good investments you own run longer, and the bad investments you own are not held for too long. So, self-awareness is critical. It lies in knowing which investments must be sold and which ones should be held onto.
In recent months, investors have been exiting their investments either because near-term returns may not be appealing or due to other liquidity demands. When an asset is sold off without adequate appreciation of its long-term investment merits, there is a high chance that a long-term winner is sold based on short-term considerations. You end up cutting a winning bet short, and nothing can be more tragic.
Investors must be diligent in times like the present. This will ensure that they retain their winning investments even if their recent performance is not too appealing. At the same time, an investor needs to exit investments where he definitely knows that the best is behind and what lies ahead may only be tough times. The coming months will be a window of opportunity to decide where conviction must continue to be placed, and where there is a definite need to shift it.