The Myth of Holding Forever

The idea of buying and holding stocks indefinitely is often seen as a wise long-term strategy, based on the belief that patience in equities pays off over time. However, India’s markets are dynamic, marked by structural shifts, evolving regulations, and frequent sectoral cycles. Company fundamentals can change rapidly due to governance, consumer trends, technology, or macro shocks.

A static portfolio risks missed opportunities and losses. Instead, regular review and strategic adjustments can better capture gains and manage risks. This blog argues that in India’s fast-changing environment, tactical portfolio rebalancing often outperforms a rigid buy-and-hold approach, supported by data and market history.

"Buy and Hold Forever" in Sensex Delivered Only ~5% Real Returns Over 30 Years

Let’s put the buy-and-hold narrative to the test using hard data.On April 3, 1995, the BSE Sensex closed at 3,316.64. Fast forward 30 years to March 28, 2025, it closed at 77,414.92-a ~23x jump. On the surface, this seems impressive. But once we factor in inflation and assume dividends were reinvested, the picture changes drastically.

●  Nominal CAGR = ~11.07%

●  Assumed average inflation = ~6%

●  Real CAGR (inflation-adjusted) = ~4.87%

This means that over three decades, an investor’s wealth only grew by ~4.87% per year in real terms. In absolute terms, the net wealth grew around 5x in real purchasing power, despite the Sensex multiplying 23x in nominal terms.

Why this matters:

• Compounding at 4.87% real return over 30 years yields just ~5x real wealth.

• Missed opportunities from sector rotation, tactical shifts, and market cycles could’ve delivered significantly higher alpha.

• Long cycles of underperformance (e.g., 1995–2003) meant years of dead capital for buy-and-hold investors.

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While Sensex grew impressively in nominal terms, inflation and structural shifts erased much of that gain. Buy and hold forever was not the best strategy-it was a strategy that left significant returns on the table. In India’s evolving markets, active portfolio management trumps passive holding.

Sensex Leadership: Three Decades of Dramatic Change

• In 1988, the Sensex featured 30 companies across industry, manufacturing, metals, FMCG, and engineering.

• By 1998, over half of those original 1988 names had exited the index, with notable drop-outs like CEAT, Ballarpur Industries, Bombay Dyeing, and Philips India no longer in the top 30.

• From 1998 to 2008, industrial churn remained high; only a handful of the 1998 lineup made it to the 2008 Sensex. Major exits included Castrol India, Novartis, and NOCIL.The 2008 list looked radically different from 1988, dominated by new entrants in finance and IT: HDFC Bank, HDFC, ICICI Bank, Infosys, and Wipro. Traditional conglomerates and manufacturing faded further.

• By 2018, less than one-third of 2008’s companies remained on the index. Industry, metals, and manufacturing once Sensex’s backbone were replaced by private banks, NBFCs (like Bajaj Finance), and consumer names (Asian Paints, Maruti Suzuki). Former giants like ACC, Grasim, and Ranbaxy were no longer among the leaders.Sector shift: In 2018, financials made up more than a quarter of the Sensex, up from virtually none in 1988. IT, which wasn’t even on the list in 1988, became a major constituent.

At Xylem PMS, this constant turnover reminds us that leadership in India’s equity markets is never static.We believe in regularly reviewing every holding, quickly exiting laggards, and staying invested in tomorrow’s leaders always in tune with where the market is heading, not where it’s been.

Once Sensex Giants, Now Out of the Index.

(Credit:- Xylem Investment Research)

The mantra of “buy and hold forever” is often glorified-but in reality, even the most successful investors sell, trim, and churn their portfolios when needed.

1. Warren Buffett - Pragmatic Seller

Often seen as the poster child of long-term investing, Buffett is far from a forever holder:

Holding Quarters	Number of Stocks	Percentage	Cumulative %
1	39	16.96%	16.97%
2	29	12.61%	29.57%
3	16	6.96%	36.52%
4	55	23.91%	60.43%
5–10	34	14.78%	75.22%
10–20	20	8.70%	83.91%
20–30	15	6.52%	90.43%
30–40	13	5.65%	96.09%
40–50	2	0.87%	96.96%
>50	7	3.04%	100%

(Credit:- Xylem Investment Research)

• Around 60% of stocks are held for 4 or fewer quarters, indicating a relatively active portfolio churn. However, a significant 16% of stocks are held for over 20 quarters, reflecting a mix of both short-term trading and long-term conviction in the portfolio.

• Apple Stake: Despite calling it the “best business,” he sold over 25% of Berkshire’s Apple holdings post-2023.

• Bank Stocks: Reduced exposure to Bank of America, Citigroup, and others as risks mounted.

2. Rakesh Jhunjhunwala - Cut the Weeds

Even Rakesh Jhunjhunwala, often celebrated for his long-term bets, never hesitated to exit a stock when he believed the earnings potential had peaked. His investing discipline wasn’t about blind holding—it was about staying with winners and cutting laggards without emotion.

• Escorts Ltd – Jhunjhunwala exited a major stake in 2022 after earnings declined and margins came under pressure.

• Delta Corp – He sold a large chunk in 2022 amid signs of slowing revenue growth and weakening profitability.

• Aurobindo Pharma – He gradually exited between 2020–2021 as U.S. pricing pressure eroded margins and earnings momentum faded.

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At Xylem PMS, we follow a similar disciplined approach regularly reviewing and trimming holdings when we believe earnings have peaked or fundamentals weaken, ensuring our portfolio stays aligned with tomorrow’s leaders, not yesterday’s laggards.

Not All That Glitters Is Gold: When Blue Chips Underperform

While blue chip stocks are often seen as the safest bets in an investor’s portfolio, not all deliver consistent long-term returns. Some once-celebrated names have barely outpaced inflation, delivering disappointingly low returns over extended periods. These cases challenge the belief that simply buying and holding any “big name” guarantees wealth creation.

Now, let’s check certain blue chip stocks that have delivered very low returns despite their strong brand image and long market presence.

Company	10 Year Share Price CAGR
TATA MOTORS	5.5%
RALLIS	5.1%
HERO MOTO-CORP	4.9%
SHOPPERSTOP	3.9%
WOCKHARDT	2%
SYMPHONY	2%
PVR-INOX	2%
LUPIN	1.5%
INDUSIND BANK	-1%
JUST-DIAL	-2%

(Credit:- Xylem Investment Research)

Conclusion: Holding Forever Isn’t Strategy—It’s Surrender

Over the last 30 years, the Sensex grew ~23x in nominal terms. Yet in real, inflation-adjusted terms, it only compounded wealth at ~4.87% annually. A passive buy-and-hold investor ended up with just 5x real wealth, despite decades of “being invested.” That’s not compounding it’s erosion in disguise.

In that same span, the very composition of the Sensex transformed multiple times-with more than two-thirds of its constituents replaced every decade. Once-dominant sectors faded. Former bluechips from Hero MotoCorp to Lupin to IndusInd Bank delivered sub-5% returns over ten years, some even negative. And the so-called “safest” bets quietly underperformed inflation.

Even legends like Buffett and Jhunjhunwala weren’t immune to churn. Over 60% of Buffett’s portfolio positions were held for less than a year. He sold Apple. Jhunjhunwala exited winner scrips without hesitation. Conviction, for them, was rooted in earnings-not emotion.

This is what we internalize every day. At Xylem PMS, portfolio decisions aren’t made once and forgotten. They’re rebuilt constantly-grounded in first-principles research, live earnings analysis, management meetings, and deep competition mapping. Every holding is stress-tested not just against its past, but its potential in a fast-moving world.

We don’t wait for the story to play out. We act when the numbers, the narrative, and the market converge. Not because we reject patience, but because we respect time and what it costs when misused.

In a country where sectors rise, leaders change, and cycles don’t repeat, being passive isn’t safe it’s expensive. And the market doesn’t hand out second chances.

If you'd like to discuss your portfolio or explore how Xylem can help you navigate this market, consult with us here.