Buy and Hold Investment Strategy
"Buy and hold" is one of the most heralded investment strategies promoted today. "Buy and hold" is also one of the few investment methods where you are guaranteed to lose money 2 out of every 5 years...so why do it?
Before expanding on the questionable value of "buy and hold", it's probably best to take a deeper look into who's spending their millions of dollars of marketing money convincing you that "buy and hold" is the best idea and why.
"Buy and Hold" Promoters
Mutual funds have a strong vested interest in having you buy into the "buy and hold" mentality since their entire business model depends upon the average investor keeping their money parked...through good times and bad.
Remember, the mutual fund companies are earning a profit from your investment even while you are accepting losses!
So "buy and hold" is really the greatest investment strategy available, it's just a matter of perspective. If you like that your mutual fund company profits while the Bear Market ravages your account value, then "buy and hold" is for you!
So let's look at some data to see how this really works.
"Buy and Hold" Facts
Between 1929 and 2002, there have been 14 Bear Markets with an average of 39% slashed off the value of stocks. During this 74 year period, it took an average of 3.5 years to return to breakeven!
Every time a "buy and hold" investor loses money in a down market, they lose invaluable time to reaching their financial goal. After eliminating overlapping Bear Markets, 41 years were spent suffering through a Bear Market or returning to break even.
In other words, "buy and hold" investors spend 2/3 of their time just to break even!
"Buy and Hold" Myths
My favorite myth or scare tactic used by investment gurus is; "buy and hold" investing is critical since you cannot afford to miss the bull run when it hits. And they go on to cite what happens to those that miss the "big days".
Ah...good point, what does happen? If you would have invested $100 in 1926 and just left it there until 1993, your investment would have climbed to $80,000. Conversely, if you had tried to time the market and missed the 30 best months, your investment would have only been worth $1,200.
"Buy and Hold" Does Work Better?
So I've just convinced you that "buy and hold" does work better right? But what would have happened if you used market timing and missed the 30 best months and missed the 30 worst months? Your investment would now be worth $120,000 or 50% more than simple "buy and hold".
Not to get too carried away but if you had avoided the 30 worst months and still managed to hit the 30 best months, your investment would have increased to an astronomical $8,600,000. Now I'm not going to try to convince you that market timing is going to hit every winner and miss every loser but I also don't think it's fair for the "buy and hold" advocates to represent only one side of the equation to their benefit either.
"Buy and hold" is a guaranteed method of losing money during every Bear Market. Give yourself a fighting chance by looking at a better way to invest.
"Buy and Hold" Replacement
So how do you avoid losing money every Bear Market with "buy and hold"? The simple answer is "get out of the stock market when it's the Bears turn". Of course, that's usually harder to do than to say.
This is where we can help you to become a better stock market investor. Not only are we going to show you how to avoid the Bear Market losses, we're going to show you how to profit from the Bull Market and then turn around and profit from the Bear Market.
And I'm not talking about extreme market timing, I'm talking about a conservative, time tested investment process.
A Better Investment Plan
Maximize your returns while lowering your overall risk through the use of a highly scientific and emotion free system. And unlike the "buy and hold" investment plan, you'll be positioned to profit from the Bear Market and the Bull Market. Now won't that be a change!
Let us show you a better way to invest!
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Sr. Managing Director