Why is buy and hold not a good investment strategy anymore?

Answer 1

It can be, but we are in a very dynamic world today. Good companies of yesterday may not even exist today. DEC, Compaq, Sears to name a few. There are still some good buy and hold companies out there but the risk is that if you do not periodically monitor your investments you may be caught off guard. I speak from experience.

I good buy and hold strategy that overall works well is to find a good mutual fund or better yet several and make periodic investments into them. You get investment diversification and you get decent investment management. But even with mutual funds you must be continually on the watch that they continue to perform in the expected manner.

Answer 2

Buying and holding is not a good strategy in and of it’s self.
It is still a good thing to do at times, but it must be done within the confines of a good asset allocation. That should by your main strategy. You also want to have an entry and exit strategy for all stocks, just holding for no reason is not wise.

There are several advantages of buying and holding There can be a tax advantage in non retirement accounts and often with large company stocks, there is a dividend payment that can be reinvested. Also, large movements often happen very fast so these are captured at the beginning while others come in after the move has already happened (and often when it is topping)

The reason a broad asset allocation is powerful is because the market cycles through different sectors and capitalizations over time.

As an example, Small cap tech stocks may be on top for a year or two, but then conditions change. Market timing is something the pro’s can’t do, Trying to gauge the tops and bottoms is compounded by not being able to know what sector the market will favor next. So the way to counter that is through a portfolio with a broad asset allocation.


I would suggest the following

Get a subscription to Barrons or Investors Business Daily

Go out to the internet and search on the following subjects. Get very familiar with the following concepts:
Asset allocation
Roth ira vs ira
Large med small cap
Value vs growth
Indexed mutual funds
ETF
Sector funds
Bonds CD
International funds
Fundamental analysis
Technical analysis
Long term investing

Answer 3

Hoa N is dead on right. You have to look at the current cycle. For instance, if you did a buy & hold in 1929, it took stocks 25 years to get back to where it was before the crash. Can you wait 25 years?

We are indeed in a secular bear market. The cycle on the Dow is about 17-18 years. The previous secular bull completed in 2000, so we still have another 11-12 years to run on the secular bear.

The people that are telling you buy and hold is good, how long have they been trading? The majority of people trading in the markets right now have really only been trading since around the mid 1990's - during the largest upleg of the bull. They've never traded a bear before and have no clue how a bear market works. Yes, if you bought in 1929 and held till 2000, the strategy overall worked, but that's a period of 71 years. Most people will work for about 40 or so years before retirement. Secular markets last 15+ years, so if someone bought at the end of a secular bull and used the buy and hold, they'd have to wait 15+ years before their stock even began to show a positive return.

If you live to be 300 years old, sure. If you had bought in 1982, sure. But we are in the middle of a secular bear and a buy and hold strategy right now will soak you.

Answer 4

Who says it's not? Lately, with the markets being flat (aside from the canadian markets), many small investors have been hearing about these large hedge fund returns and new financial products being put out there. Everyone is in for the quick buck, no one has patience. A buy and hold is still a great strategy, just find companies that have fallen out of love with the markets, and hold on to them. Good dividend paying stocks are the best, and the management of these companies know that they are in the hot seat to start delivering good returns, so you will be see results in the future. (whether it be a share buyback, a large dividend payout, or a merger/takeover to use excess cash to buy profits).

With the interest rates being at what they are at, companies will find it hard to borrow money to fund research/operating activities. That means you should companies that have plenty of cash on hand, such as Microsoft and Berkshire Hathaway.

Answer 5

It is a good strategy. The problem is you have to buy and hold GOOD COMPANIES. Buying and holding a little bit of everything and you'll never do any better than average.

The consequences of overdiversification and fiscal imbalances.

There are some companies that are growing consistently and massively and yet you probably don't buy and hold those shares....

http://www.nabloid.com

Answer 6

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Answer 7

yes, it is not a good investment for this decade. Since 2001. the dow, sp500,nq100 still lose money. Since 2001, we are in the secular(mega) bear market, this bear market have long way to go. History repeat itself. Let me show you far back in 100 years of stock market:
1900-1920( secular bear market): average dow return almost 0.5%
1921 1929( secular bull market): average dow return about 15%
1930-1946( great depression) stock return nothing.
1946-1966( great bull market) good stock return
1966-1982( secular bear market) dow stay 1000 mark for 16 years
1983-2000( secular bull market) the dow going from 1000 point to 11740 point
since 2001 -2006, dow still not recover

one important point now
in secular bull market ===>>buy and hold work
in secular bear market as US in right now===>>buy and hold won't work.

One more point secular bull VS. secular bear

paper asset==stock up Vs paper asset==stockdown

hard asset==oil,house,commoditydown VS. hard asset==up

Answer 8

Who said it's not. I have found that a mininmum 6 month-1 year time hoirzion are the minimum to maximize profits on a position. I always use a trailing stop so that the profits are basically locked in and losses on occassion are minimalized. I also write covered calls to enhance return on securities I've already got a profit in. PEACE!

Answer 9

In order for buy and hold to work one must have the patience to hold. Few people do. If you pick stocks wisely and resist the urge to rejigger your portfolio on a regular basis you will eventually be rewarded, but you may have to wait a little while.

Answer 10

I prefer the cutting edge concept of buying low and selling high.

although at times I do admit to buying high and selling higher.

Buy and hold is too blind - better to think, research then buy wisely, more research then sell to maximize profit potential and buy a different stock based on more research, so on and so on.

Refer to Investors Business Daily for advice in this area.

Also Cramer's recent best seller has excellent advice - just beware of his show - he has to pick too many winners and has to go out on a ledge too often.