The myth
People become intimidated by investing when they think it’s too complicated, takes too much time, or requires a lot of technical skills.
If you’re too busy to learn the ins and outs of investing or managing a portfolio, some would advise creating a “buy and forget” portfolio.
This involves buying assets that you believe are of good quality and have the potential for long-term growth, then leaving things alone.
The reality
Setting up a “buy and forget” portfolio may involve making one-time investments in assets deemed stable and poised for long-term growth.
These typically include blue chip stocks and index funds or exchange-traded funds (ETFs) that track major financial market indices. Others may practice peso-cost averaging by investing set amounts on a regular schedule.
The “forget” part of the strategy means you’ll make little to no changes to your portfolio until it’s time to take your money out. Here are a few reasons this approach can be attractive:
- Minimal effort
There is no need for constant monitoring or frequent decision-making with a passive approach. A hands-off method may be ideal for those who don’t have the time or expertise to actively manage their portfolio.
- Lower transaction fees
Passive investors transact less frequently than active investors. By making fewer transactions, investors can save on fees and minimize the impact of transaction costs on their potential earnings.
- Prevents emotional investing and market timing
You’ll avoid emotional stress and knee-jerk reactions when you leave your investments alone instead of constantly checking on them.
It can also help you resist the urge to follow short-lived trends and try to time the market, which may lead to costly mistakes especially if you’re a beginner.
While there are good reasons to simplify your portfolio, completely leaving it untouched can expose you to risks. Here are 3 things to consider:
- It can take a lot of money
If you’d like to make a significant, one-time investment in 1 or more products, you’ll need a sizeable capital.
If you’re still trying to understand the market, your options, and your role as an investor, you may find it easier to put in regular amounts into your investment account on a periodic basis.
- Your situation may change
As you go through different life stages, your goals, financial capacity, and risk appetite may evolve. It’s ideal to have an investment portfolio that takes these changes into account.
For example, someone in their 20s may be able to take on more risk than someone who’s nearing retirement and would need the money sooner.
With a hands-off mindset, you might fail to adjust your portfolio to match your situation.
- There can be missed opportunities
If you never check how your investments are doing, you can end up holding onto underperforming assets for far too long.
By allocating your money to only a very small selection of products, you might also miss out on opportunities to reduce risks and improve your potential returns.
Verdict: It depends
"Set it and forget it" is an investing mindset that can help you manage emotions, avoid having to do market timing, and stay invested for the long term. A low-effort strategy can also be helpful if you can’t dedicate much time for investing
However, “forgetting” your investments shouldn’t mean you’ll let your portfolio go unchecked until it’s time to take your money out.
It’s still wise to assess and check on your portfolio periodically to account for changes in your situation and goals.
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