Debunking the investment myths of “buy and hold” strategies
“Would you let it ride?”
Looking back on the recent meltdown of most of the worlds financial markets in 2008 and early 2009 most investors would have a hard time adhering to the age old strategy of “buy and hold.” Today you could rephrase the statement to “buy and hope.” Unfortunately, for most situations, hindsight is 20/20.
In today’s world the haunting lyrics of the Bachman Turner Overdrive song “Let it Ride” could give every investor a reason to rethink their thought process when choosing to purchase stocks, bonds, commodities, and even real estate.
For decades conventional wisdom has been that we should buy the “blue chips” put them away and forget about them. After all, “What’s good for GM is good for the country” used to be a mantra on Wall Street.
Today the government owned General Motors has left a path of devastation in it’s wake for both the stock and bond holders of many citizens whose retirement plans often revolved around their faithful purchase of the company stock. Ironically General Motors own pension fund managers sold all of their own company stock before they declared bankruptcy. Even they did not want to own it.
It is one of the many stories confronting the millions of people who are still in shock over the events over the last couple of years and crosses over into some of the most sacred companies of recent times. Look at what an investment in GE would have returned to an investor who bought it ten years ago and is still holding it today. The return for over a decade is negative. Look at Citigroup or Bank of America in that same time period. The S&P 500, one of the most highly revered investment benchmarks in the world also shows a negative return for the decade that ended in 2008. But,”Isn’t what’s good for GE is good for the country now?” That statement might be true at sometime in the future but for now it’s probably better to look at other venues.
History shows us that every market setback is eventually followed by an equal and even greater recovery. The question remains, “When?”
The answer is that in every type of market (bull, bear, or flat) there are extensive opportunities to prosper. The worst market pullbacks will often yield the greatest upside. Unfortunately, the masses usually sit paralyzed on the sidelines and eventually enter back in the market after most of the big profits have been made in a recovery.
How does the small investor compete when you have stocks like Citigroup trading nearly two billion shares in one day? How can one compete with institutions that move volume that is mind blowing by comparison to even a few years ago.
The answer starts with “seek and you shall find” and is followed by “don’t be afraid to get in and get out.” Look at every sector of the market and follow the money.
The mutual fund industry tracks the “flow” of money into and out of funds every month and it is usually a great indicator of which direction the general markets are going. Remember, they are like battleships and cannot change their direction like an individual in a speed boat can which gives the individual investor an edge on the big guys. You just have to be ready to move.
However, before you get started you must have a plan.
Are you going to buy and “Would you let it ride?” or are you going to be open to a proven paradigm called “Ring the cash register.”
Stay tuned to learn how you can “Ring the cash register.”
davidcrum