Buy and Hold, my problem

Originaly posted 5 march 2007

Since the day I read about Warren Buffett I have been a fan.

He always preaches the buy and hold strategy, comparing it to marriage. You get married with the intention of staying married fore ever. We can't deny this method works. It has made Buffett billions.

However I have one rather large problem with this method. For Warren Buffet this won't be a problem but for me a small time investor like me it is. Namely cash.

Buffett has enough money at hand to keep investing. Even his yearly dividend is enough to buy out a lot of companies. A small time investor like me however can buy in to 5 companies, and then we are done. We just hold and hold and hold. So after we spent our initial amount we have no more cash to invest. Waiting for the dividends would mean we could invest a similar amount every 5 years.

Is this the method to invest that someone who is able to research stocks can stand? Maybe it is the best way for high profits. But I know that I could not hold on to this method. It would mean that I could only do something in best case scenario once a year. I love investing, I love reading about stocks, investing, macro-economics and everything else involved in investing. But I need to stay active in a good way (like the Magic Formula), if I don't I know I'll start thinking to much and eventually start acting emotional and maybe even worse slide in to speculating.

I'm almost through Benjamin Grahams "The Intelligent Investor" and I will start to combine some of his thoughts with what I read about Buffet's method. But this part still troubles me. It doesn't seem hard to buy only good companies. The hard part seems knowing when to sell.