Third Step of Terry Smith's Playbook: Do Nothing

Only over the long run can an investor truly benefit from a company’s superior fundamentals, hence the main reason for which the third leg of Terry’s strategy is “Do nothing”. On this front, I can introduce another component that makes up a huge part of his overall strategy, not trying to time the market nor operate based on forecasts, acknowledging the futility of doing so.

“Macro views and developments have no bearing on our strategy” Jan,2013

“The fact that we seem to have seen this movie before might lead us to conclude that we know how it will end” Jan, 2018

“A bear market will occur at some point. We may indeed already be in one. The best stance is to ignore it since you can’t predict it or position yourself effectively to avoid it without impoverishing yourself by forgoing gains” Jan, 2019

In all his letters, Terry believes the yearly portfolio turnover can act as the instrument of measurement in regards to how is the fund performing upon the third leg of the strategy.

“Turning to the third leg of our strategy, which we succinctly describe as ‘Do nothing’, minimising portfolio turnover remains one of our objectives and this was again achieved with a portfolio turnover of 4.1% during the period.”

Keep in mind this is only one quote. Portfolio turnover oscillated between -3 and 9% approximately, most of years being between 2-5%. (Ranges are my own estimates as far as memory goes)