Points of Interest – Spring 2016 Let go of the anchor

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Nothing lasts forever

This article, by Justin Baiocchi, was originally published in The Northern Daily Leader on 4 June 2016.

Due to an equipment failure, I have recently been on the lookout for a new microwave. The now inoperable microwave which we had owned, was only around four years old, so I was less than thrilled to be having to replace it so soon. This seems to be the way with electrical appliances these days – last year our washing machine stopped working after less than five years and also had to be replaced (just as costly to fix as to buy a new one, according to the repairman). In both cases it seemed that the mechanical gremlins had arrived way too early – a 2007 study into the ‘Life Expectancy of Home Components’ by the US National Association of Home Builders estimated that microwaves and washing machines had life expectancies of 9 and 10 years respectively. On a human equivalent, both of my appliances died in their forties, a very early passing.

When it came time to look for a new microwave, I naturally started with the internet. It turned out the microwave I needed to buy was the Panasonic NE-691, loved by its owners and with the oldest working example being nearly 40 years old. As should be expected however, Panasonic stopped making that model decades ago; probably too reliable I imagine. Now you’re lucky if you can coax a few years out of your latest appliance; where an appliance was once seen as an investment, they’re now nearly throw-away items.

When it comes to shares and investing however, you should expect more than a few years of gainful ownership. That’s not to say that investing is a set and forget approach, far from it. Changes in management, technology, the economic environment and consumption patterns are just a few of the factors which influence the performance of a company over time. The trick is to find the balance between the day traders who think 10 minutes is a long time to be a shareholder, and those who think the ‘buy and hold forever’ approach is the way it’s done. What’s certain is that the average holding period (the length of time investors typically hold their shares before selling) has been falling over time, by some estimates now averaging only 5 days in the United States. Some companies can be safely held for years, others need far closer scrutiny. They’re all different, so do your research, as I should have done before buying the microwave with the four year expiry date.