Let’s Talk About Holding On: What It Takes to Find a Huge Winner in Investing
Hi everyone, John here. It’s great to be with you again!
My assistant Lila and I were browsing some of the latest financial news, and we stumbled upon a notice for a podcast episode that really got us thinking. It featured a guest named Bill Mann, who works with a company called Motley Fool Asset Management. The topics they were set to discuss were fascinating: things like “buy and hold investing,” “10-bagger stocks,” and “managing investor behavior.”
Now, I know those phrases might sound like jargon from a stuffy finance textbook. But trust me, the ideas behind them are incredibly important and, when you break them down, surprisingly simple. So today, let’s unpack these concepts and see what they mean for regular people who are just starting to think about their money.
The “Buy and Hold” Strategy: A Lesson in Patience
One of the first big ideas mentioned was “buy and hold” investing. This is a perfect place for us to start because it’s one of the most fundamental strategies out there.
Imagine you plant a small apple tree sapling in your backyard. You wouldn’t go out every single day and dig it up to check if the roots are growing, would you? Of course not! You’d give it soil, water, and sunlight, and then you’d have the patience to let it grow over many seasons. Eventually, your patience would be rewarded with delicious apples.
“Buy and hold” investing is a lot like that. When you buy a stock, you’re buying a tiny piece of a real business. If you believe that business is strong and will do well over the long term, the “buy and hold” strategy says you should hold onto that piece of the company for a long time—we’re talking years, or even decades!
This is the complete opposite of what you might see in movies, where traders are frantically buying and selling every second. That approach, known as active trading, can be very stressful and often leads to mistakes. Buying and holding is about trusting your initial decision and giving a good company the time it needs to grow.
The Dream of a “10-Bagger” Stock
“Okay John,” Lila piped in, looking up from her screen. “I’m with you on the whole ‘planting a tree’ idea. But the podcast title mentions ‘how to hold the biggest winners,’ and they brought up something called a ’10-bagger stock.’ That sounds like something you’d get at a grocery store, not on Wall Street. What on earth is that?”
That’s a fantastic question, Lila! It definitely sounds a bit strange. A “10-bagger” is a term popularized by a famous investor, and it simply means an investment that increases in value to ten times its original purchase price.
Let’s use a simple example:
- You do some research and decide to invest in a promising new company. You buy its stock for $5 per share.
- You hold onto that stock patiently, through good times and bad.
- Years later, the company has become incredibly successful, and its stock price has risen to $50 per share.
Voilà! You have a 10-bagger. Your initial investment is now worth ten times what you paid for it. It’s the kind of home run that can make a huge difference in your financial life. The challenge, of course, is two-fold: first, finding a company with that much potential, and second, having the emotional strength to hold on long enough to see it happen.
What Was Mentioned About “The Motley Fool 100”?
The conversation with Bill Mann also brought up something called “The Motley Fool 100.”
“Aha!” said Lila. “Is that a list of 100 guaranteed 10-baggers? Where do we find it?”
Haha, if only it were that simple, Lila! The original article, being just a brief summary, doesn’t explain exactly what “The Motley Fool 100” is. It just mentions it as a topic of discussion. However, we can use the context to understand the general idea.
The Motley Fool is a very well-known company that provides investment research and financial advice. So, “The Motley Fool 100” is most likely a special index or fund that includes 100 specific companies selected by their team. Think of it like a music critic’s “Top 100 Albums of All Time.” It’s a curated collection based on their specific philosophy, likely focusing on companies they believe have excellent prospects for long-term growth.
For us as beginners, the key takeaway isn’t about this specific list, but the concept behind it: experts often package their best ideas into focused groups like indexes or funds to help guide investors and simplify decision-making.
The Toughest Challenge: Managing Your Own Behavior
This brings us to what might be the most important—and most difficult—part of investing: managing your own behavior.
Think about trying to stick to a healthy diet. You can have the most perfect, scientifically-backed meal plan in the world. But that plan is useless if you can’t resist the temptation of a late-night pizza or a donut in the breakroom. The real challenge isn’t the plan; it’s your own discipline and emotions.
It’s exactly the same in investing. Our emotions are our worst enemy. Here are the big ones:
- Fear: The stock market doesn’t go up in a straight line. There will be scary days, weeks, or even months when prices fall. Your gut reaction might be to panic and sell everything to “stop the bleeding.” But history has shown that markets recover, and panic-selling often means locking in your losses and missing the eventual rebound.
- Greed: When an investment is soaring, it’s easy to get swept up in the excitement. You might be tempted to throw all your money at it, ignoring the risks. This is known as “chasing” a hot stock, and it can be dangerous if the trend suddenly reverses.
- Impatience: This is a big one. We live in a world of instant gratification, but great investments take time to mature. Selling a solid company after a year just because it hasn’t become a 10-bagger yet is like digging up that apple sapling because it hasn’t produced a full bushel of apples.
The ability to hold onto a “biggest winner” is less about financial genius and more about emotional fortitude. It’s about staying calm when everyone else is panicking and being patient when everyone else is chasing quick profits.
A Few Final Thoughts
John’s Take: For me, this is a powerful reminder that the secret to good investing isn’t always found in complex formulas or secret tips. More often, it’s about having a simple, sensible plan—like buying and holding great businesses—and then having the discipline to see it through. The biggest battle is rarely with the market; it’s with the person staring back at us in the mirror.
Lila’s Take: I’m so glad we talked this through! Terms like “10-bagger” sounded so intimidating before, but now I see it’s just a simple way of describing amazing growth. Realizing that patience is a real strategy makes investing feel so much more approachable for a beginner like me. It’s comforting to know you don’t have to be a market wizard to succeed!
This article is based on the following original source, summarized from the author’s perspective:
Talk Your Book: How to Hold the Biggest Winners