Based on consistent results I think Buy & Hold should be renamed Buy, Hold & Bye-Bye. It sounded great for a while, especially for the vast majority of investors who lack the time or interest in really doing due diligence on investments have.
Investing, for some, might be a hobby but it can certainly be an expensive one. Yet, if you are like many of us, you know there are options for putting your money to work and to grow. Nevertheless, investing, like any business (and it is a company) has its own unique challenges. Her are what I consider to be the top three.
1. Intelligently decide what to buy
When it comes to Mutual Funds, there are today more than 13,000 choices. You are going to check each one, right? Yes, of course. And even before you do check out, what are you watching? Past? What else can you look? But as it says on the bottom of each prospectus, past performance is no guarantee of future performance. And in these days of squinting cooked books, past performance is hardly a guarantee of results from the past! So you do not just have to decide what to buy, but you have to stop to make sure you know when to sell when the future performance of an investment does not match your expectations.
Sure, there are investment rating services to buy a false sense of security and cradles. But the fact is that virtually every investment in recent years have touted valuation services has lost money. So much for depending on the type of expert advice.
2. Determining when to buy?
It should not matter when you buy if you're never going to sell, but it does. If you just buy before the market falls, what you think: You will start with a loss that you have to recover before your investment starts making money. So what? According to statistics on the sale of mutual funds, most investors buy just in time to grab a loss.
Buy & Hold can prove to be a profitable approach if you intend to keep forever. But we do not live forever, and most people will want to sell at some point forever clapping their investments. It is little consolation to know that if you hold your investments for another 20 years, they will make money, especially if you are retired and want to take next month a cruise.
3. Staying the course.
It takes to hang on to an investment when you see it disappear before your eyes. Strong stomach Or even if it is the following up and down on a day. (Like today, for example.) And once you decide that having to wait for three decades before your investment is back to square one is not such a great deal, what happens to your Buy & Hold strategy then? It is out of the window and all you holding the bag. The many army bag.
So what to do, especially an investor an investor who is not a professional? For one thing, finding a reliable method for obtaining information. One that I want is a trend analysis approach that objectifies market behavior. This kind of approach is more kinetic because it is not dependent on past performance, is based on giving. Towards future past performance and current performance of a "trend" While that is not infallible in every sense of the word, it is a wider range of information than most guidebooks.
Using one of these as a basis for your strategy, determining a buy point and, most importantly, a selling point for any investment you make. Get comfortable taking small losses before they turn into major disasters.
There is always investing in the risk. But there are ways to reduce the risk not only to minimize a gambler so you are an investor, with high expectations for a Buy & Hold approach that many people now find they have failed.
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 learn more about his approach and find his FREE newsletter please visit:
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