The Demise of Buy & Hold -

Home
>
Investing
>
The Demise of Buy & Hold

The Demise of Buy & Hold

Based on consistent results I think Buy & Hold should be renamed Buy, Hold & Bye-Bye. It sounded great for a while, especially for the huge majority of investors who don't have the time or interest in really doing due diligence on investments.

Investing, for some, might be just a hobby, but it can sure be an expensive one. Yet, if you're like many of us, you know there are opportunities for putting your money to work and having it grow. Nonetheless, investing, like any business (and it is a business) has its own unique challenges. Her are what I consider to be the top three.

1. Intelligently Deciding What to Buy

When it comes to Mutual Funds, there are today over 13,000 choices. You're going to check out each one, right? Yeah, right. And even for those you do check out, what are you going to look at? Past performance? What else can you look at? But as it says on the bottom of every prospectus, past performance is no guarantee of future results. And in these days of cockeyed cooked books, past performance is barely a guarantee of past results! So you need to decide not only what to buy, but you have to be darn sure you know when to sell it when future results of an investment don't match your expectations.

Sure, there are investment rating services that provide a false sense of security to Buy & Holders. But the fact is that pretty much every investment that rating services have touted over the last few years has lost money. So much for depending on that sort of expert advice.

2. Determining When to Buy?

It shouldn't matter when you buy if you're never going to sell-but it does. If you buy just before the market falls, guess what: You will start with a loss that you have to recover before your investment begins making money. So what? According to statistics on mutual fund sales, most investors buy just in time to grab a loss.

Buy & Hold may turn out to be a profitable approach if you intend to hold forever. But we don't live forever, and most people are going to want to sell their investments at some point before forever hits. It's small comfort to know that if you hold your investments for another 20 years, they will make money-especially if you're retired and want to take a cruise next month.

3. Staying the Course.

It takes a strong stomach to hang on to an investment when you see it disappearing before your very eyes. Or even when it's up one day and down the next. (Like these days, for example.) And once you decide that having to wait for three decades before your investment gets back to square one is not such a great deal, what happens to your Buy & Hold strategy then? It's out the window and all you're holding is the bag. The much emptier bag.

So what's an investor to do, especially an investor who's really not a professional? For one thing, find a reliable method of gaining information. One that I like is a trend analysis approach that objectifies market behavior. This type of approach is more kinetic in that it doesn't rely on past performance-it relies on past and present performance to indicate a "trend" toward future performance. While that's not infallible in any sense of the word, it is a broader range of information than most guides.

Using one of those as a foundation for your strategy, determine a buy point and, most importantly, a sell point for any investment you make. Get comfortable with taking small losses before they turn into big disasters.

There is always risk in investing. However there are ways to minimize risk so you become an investor, not merely a gambler with high hopes for a Buy & Hold approach that many people have now found to have failed them.

About The Author

Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped hundreds of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: http://www.successful-investment.com; ulli@successful-investment.com

In The News:

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.thestreet.com/story/10439912/1/value-investing-101-dillards.html%3Fpuc%3Dgooglen%26cm_ven%3DGOOGLEN%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNFiNPmELZIZJGtD00MHz36tYGp3ewValue bInvesting/b 101: Dillard#39;s/abrfont size=-1font color=#6f6f6fTheStreet.comnbsp;-/font nobr11 hours ago/nobr/fontbrfont size=-1So as the financial sector continues to scramble for survival, can Bank of America#39;s purchase of Merrill Lynch, Buffett#39;s binvestment/b in Goldman Sachs and GE b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.thestreet.com/story/10441111/1/the-pitfalls-of-playing-1k.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNHKJ21KpPVwkVBuv9VYIjp0H6Rk8AThe Pitfalls of Playing $1K/a font size=-1 color=#6f6f6fnobrTheStreet.com/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.thestreet.com/story/10441019/1/realmoney-winning-calls-keep-coming.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNG9n8XPz8uPj9eyfSNRF21oFTo0mQRealMoney: Winning Calls Keep Coming/a font size=-1 color=#6f6f6fnobrTheStreet.com/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.thestreet.com/story/10441701/1/five-dumbest-things-on-wall-street-oct-10.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNHA4wv2OypE-AdwUTkWB6rzLVgDvgFive Dumbest Things on Wall Street: Oct. 10/a font size=-1 color=#6f6f6fnobrTheStreet.com/nobr/font/fontbrfont size=-1 class=pa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.thestreet.com/story/10441008/1/lessons-from-a-failed-investment.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNEuzsq1vh84khQY_UxkUuyVH4b7uwnobrTheStreet.com/nobr/anbsp;- a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.thestreet.com/story/10441167/1/mad-money-lightning-round-sell-gamestop.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNE6bDJTl4amfVpFTRrwUnEiPa4e1wnobrTheStreet.com/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1255216354hl=ennobrall 63 news articles/nobr/a/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.boston.com/business/markets/articles/2008/10/07/wall_street_struggles_to_rebound_after_global_rout%3Fp1%3DWell_MostPop_Emailed6cid=1256229989ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNGQTrNSPlO5wHaivHTyGwSZOGSyWAimg src=http://news.google.com/news?imgefp=kLFY_xFdpJQJimgurl=cache.boston.com/resize/bonzai-fba/AP_Photo/2008/10/07/1223409153_0745/539w.jpg width=80 height=63 alt= border=1brfont size=-2Boston Globe/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.cabot.net/Issues/CWA/Archives/2008/10/Investment-Misconceptions.aspxcid=1256229989ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNFT_1h1diydhdrRraBGCssyktbLiADon#39;t be Fooled by These bInvesting/b Misconceptions/abrfont size=-1font color=#6f6f6fCabot Wealth Advisory,nbsp;MAnbsp;-/font nobr5 hours ago/nobr/fontbrfont size=-1By Michael Cintolo Cabot Heritage Corporation was founded in 1970 to provide honest, high-quality binvestment/b research to individual investors and binvestment/b b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.youtube.com/watch%3Fv%3DZprA5wnrscgcid=1256229989ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNHdJY8Pccz_aVM8Kw2RJ5VfK4BvJQVideo: Stocks Mostly Lower As GM Declines/a font size=-1 color=#6f6f6fnobrAssociatedPress/nobr/fontobject width=448 height=356param name=movie value=http://www.youtube.com/v/ZprA5wnrscg/paramparam name=wmode value=transparent/paramembed src=http://www.youtube.com/v/ZprA5wnrscgtype=application/x-shockwave-flashwmode=transparentwidth=448height=356/embed/objectbr/fontfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.voanews.com/english/2008-10-09-voa77.cfmcid=1256229989ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNHrGAT7FL-QR9g1T9uiyT3jXPSwYAWomen#39;s bInvestment/b Club in California Plans to Weather Stormy Markets/a font size=-1 color=#6f6f6fnobrVoice of America/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://sify.com/finance/fullstory.php%3Fid%3D14773761cid=1256229989ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNF9XMAbVJDuY-Un7Ya47MDb5jql1ABuy stocks when there’s blood on the street/a font size=-1 color=#6f6f6fnobrSify/nobr/font/fontbrfont size=-1 class=pa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.wgy.com/pages/onair_roney.html%3Ffeed%3D133292%26article%3D4361487cid=1256229989ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNHWergK45rocK5nfLA0_0yrTJkevAnobrWGY/nobr/anbsp;- a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.kiplinger.com/features/archives/2008/10/knight-kiplinger-on-buying-stocks-now.htmlcid=1256229989ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNEaPFq68HGkk79oq-dXCI2ZrsZ50gnobrKiplinger.com/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1256229989hl=ennobrall 2,850 news articles/nobr/a/font/div/font/td/tr/table

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.post-gazette.com/pg/08284/918877-28.stmcid=1256248200ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNGHht72lj5oX9lunmIlHlx6jZ95zwimg src=http://news.google.com/news?imgefp=JOvQv0fvsAoJimgurl=www.post-gazette.com/pg/images/200810/xaptopix_financial_meltdown_.8_500.jpg width=80 height=53 alt= border=1brfont size=-2Pittsburgh Post Gazette/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.valleynewstoday.com/site/news.cfm%3Fnewsid%3D20159517%26BRD%3D2703%26PAG%3D461%26dept_id%3D555139%26rfi%3D6cid=1256248200ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNH0_P0X9EFe49cMtq3DhLh2vVTKYgOn bInvesting/b: What you should know about Market corrections.../abrfont size=-1font color=#6f6f6fValley News Today,nbsp;IAnbsp;-/font nobr8 hours ago/nobr/fontbrfont size=-1While historically the stock market has spent more time being bullish than bearish (which is why stocks have been considered a good binvestment/b over the b.../b/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.usatoday.com/money/perfi/columnist/waggon/2008-10-09-buy-low_N.htmcid=1256248200ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNF1bqKhxYzrVPDUgzRv05YCw2newASmart investors look for some stock gems amid the rubble/a font size=-1 color=#6f6f6fnobrUSA Today/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://www.post-gazette.com/pg/08284/918877-28.stmcid=1256248200ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNGHht72lj5oX9lunmIlHlx6jZ95zwSmall investors dazed, confused by fluctuations/a font size=-1 color=#6f6f6fnobrPittsburgh Post Gazette/nobr/font/fontbrfont size=-1a href=http://www.citywebshopper.net/articles/includes/redirect.php?url=http://mutualfunds.about.com/od/mutualfunds101/p/Funds101.htmcid=1256248200ei=AdzvSLWmE6CQ6AO2qMGiAwusg=AFQjCNGTGjQ0i1nNY7QtUE3p5rVG2BVUeQ[an error occurred while processing this directive]/a font size=-1 color=#6f6f6fnobrAbout - News amp; Issues/nobr/font/fontbrfont class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1256248200hl=ennobrall 9 news articles/nobr/a/font/div/font/td/tr/table

investing - Google News