Many long-term equity investors sleep well, confident in the knowledge that the mature, profitable companies in their portfolios are able to withstand periodic market shocks while fending off competitors. However, since nothing lasts forever, many of these large caps will fade away, possibly within the lifetimes of current shareholders.
The concept of blue-chip mortality presents a challenge for individual investors who favor the "set it and forget it" school of portfolio management. Understandably, they want to minimize churn to contain costs and capture long-term gains, and they also want to manage long-term risk. To reach both goals, they should develop a focused sell discipline to identify which of their big names are starting to show early signs of faltering.