3 Things to Do If You Don't Regularly Monitor the Markets

While buy-and-hold investors tend to do better in the
long term, it is still essential to be smart even if you are not regularly
monitoring your positions or the markets. Here are three things that such
investors should consider doing during the rare times they manage or make
changes to their investments.   

Hold Actively Managed
Funds

While data from
Standard & Poor’s showed that more than 90% of actively managed large-cap
funds could not keep up with the S&P 500’s performance in the last two
decades, that result only involved the large-cap space.

If you look at the
small- and mid-cap space, the success rate of owning specific actively managed
funds against relevant benchmarks is often higher than in the large-cap area.

That is particularly
true in the one- and three-year timeframe, where many small- and mid-cap fund
managers appear to gain an advantage. The same can be said for global and
emerging market funds, although it tends to be better.

Additionally, small-cap
and international funds have a better long-term history than the large-cap
ones, despite not being able to beat them each year. Still, that does not mean
that long-term investors should only stick to actively managed small-cap and
international funds.

Instead, the lesson is
that those fund managers who deal with securities beyond the market’s lists of
popular stocks can usually do what they need to do. And that is, find
investment opportunities that other market players have not discovered yet.

Stay Invested in
Predictable Stocks

Stay invested in companies
that are predictable that they don’t necessarily need to be the headline for
the day. While many consider themselves long-term investors, some of them are
actually not. If you think looking for a publicly-traded company making
headlines is research, it is not.

Companies featured on
headlines of news reports could help corroborate the excellent performance for
a certain amount of time, but not all the time.

For example, electric
truck maker Nikola Corp. gained almost 1,000% in 2020 after its June initial
public offering (IPO) via a special purpose acquisitions company (SPAC),
VectoIQ Acquisition Corp.

However, that surge
only lasted for a couple of days, and its shares price had now returned to
where it was when Nikola was still VectoIQ. That development suggested that
Nikola was not as ready to compete with Tesla Inc. as the optimism signaled at
that time.

Invest in Companies
That Will Evolve

Many companies can
evolve, but not all of them are guaranteed to do so. It is crucial for
businesses to evolve and adapt, as they
are vital to their survival. If they are not causing the disruption themselves,
they could be disrupted.

Take companies Eastman
Kodak Co. and Polaroid Corp. as examples. Both companies dominated the camera
industry, but their inability to evolve into digital photography eventually led
to their fall.

Kodak finally filed for
bankruptcy in 2021 after it was disrupted by digital cameras and was unable to
leverage its brand name and intellectual property to deal with industrial,
commercial, and professional video markets.

That was also when
smartphone cameras demonstrated better digital imaging capabilities to become
excellent alternatives.

Such inflexibility is
contrary to brands like Google LLC. While it started as a simple search engine,
its parent company Alphabet Inc. has strategically explored related businesses
such as cloud computing, mobile operating systems, and digital entertainment,
like online video-sharing platform YouTube.

Those showed broader
uses of Google’s user base and fundamental capabilities and proved that
Alphabet could embrace innovation to evolve and thrive.