There's been a lot of takeover activity in the market over the last several years. If you feel like you're being left out by all the merger hoopla, take heart.

You're probably better off just watching the takeover game from the sidelines.

I say this for two reasons. First, a lot of academic research has shown that takeovers, on average, add very little, if any, shareholder value over time. Ever wonder why most acquirers see their stock price decline when they announce a deal? One reason is that the company doing the buying usually overpays. This is especially true if the firm is involved in a bidding war for the company. Also, successfully integrating two companies, oftentimes with very different technology platforms and different cultures, can be an expensive and difficult process.

The upshot is that you are probably better off in the long run if a company you own never buys another company. Yes, I know a few companies seem to make a growth-by-acquisition strategy work (Cisco comes quickly to mind). However, don't expect most firms to do it very well.

Now, what if one of your companies is acquired. This is a windfall for you, right?

Not so fast. To be sure, shareholders often reap a short-term windfall if one of their companies is bought. However, what about the long-term implications? After all, perhaps you bought the company with a 10-year time frame in mind and the company gets bought after just 18 months. You made some money, but what about all the money you would have made had you been able to hold the stock for the 10-year period?

Here's a perfect example. What if Cisco had been acquired five years ago? Sure, shareholders would have made a nice profit at the time, but they would have given up the huge gains the stock posted in the subsequent five-year period.

Great investment ideas are finite. If you have what you think is a great investment idea, it is almost a tragedy when that idea is taken out of play because the company is acquired.

Bottom line: If the companies you own seem to be sitting on the sidelines when it comes to takeover action, don't be mad. Indeed, it may be the best thing for your portfolio.