Some random musings and thoughts of mine on the ever lasting buy and hold debate.
- It only works if the bear hits early in your career. Many folks will not live the life of retirement they envisioned because the bear hit late in their career. (This could also be attributed to poor risk management.)
- In a bull market you'll look like a genius when everyone else is trying to call the top.
- In a bear market, Buy and Holders seek solace in axioms such as, "Stocks for the long run", or "I don't let the news influence my investment decisions", even though they will still check their account balances twice daily.
- Buying an actively managed mutual fund that seeks to outperform an index is not buy and hold because your manager will be buying and selling stocks for you.
- Using IFT's wisely to re-balance your porfolio monthly is not buy and hold since you will be selling what's in vogue to buy more of what's out of flavor.
- Most investors are not born buy and hold. Most investors become buy and hold after the bull breaks their heart somewhere along the line.
- Wall Street has lobbied hard over the years for buy and hold in order to keep a steady stream of fees flowing into their coffers. Big businesses have sold their souls to the mutual fund industry in the form of the 401K.
- Most folks who 'beat' their index are using the incorrect index to benchmark. If you use only one foreign stock just one time in a trade during the year, your benchmark becomes the Global Stock Market, not the S&P 500. Most TSP investors benchmark to the Dow or S&P 500 even though they use the I Fund in their porfolio.
- Trading and using ETF's has it's downfalls. Most folks have no idea of what differences tax considerations and commissions make when it comes to final computation of their return.
- The media is an investors worst enemy. The media brings doubt and anxiety into an investor's psych.
- It's the big trends that matter. Buying and holding the global market for the duration of the bull and selling out just before the bear is what I believe to be the Holy Grail to investing. Not one person on this planet knows how to get this simple concept right every single time.
- Whether you're "buy and hold" or "trade all day", all it takes is one good bear to steal your Mojo.
- It only works if the bear hits early in your career. Many folks will not live the life of retirement they envisioned because the bear hit late in their career. (This could also be attributed to poor risk management.)
- In a bull market you'll look like a genius when everyone else is trying to call the top.
- In a bear market, Buy and Holders seek solace in axioms such as, "Stocks for the long run", or "I don't let the news influence my investment decisions", even though they will still check their account balances twice daily.
- Buying an actively managed mutual fund that seeks to outperform an index is not buy and hold because your manager will be buying and selling stocks for you.
- Using IFT's wisely to re-balance your porfolio monthly is not buy and hold since you will be selling what's in vogue to buy more of what's out of flavor.
- Most investors are not born buy and hold. Most investors become buy and hold after the bull breaks their heart somewhere along the line.
- Wall Street has lobbied hard over the years for buy and hold in order to keep a steady stream of fees flowing into their coffers. Big businesses have sold their souls to the mutual fund industry in the form of the 401K.
- Most folks who 'beat' their index are using the incorrect index to benchmark. If you use only one foreign stock just one time in a trade during the year, your benchmark becomes the Global Stock Market, not the S&P 500. Most TSP investors benchmark to the Dow or S&P 500 even though they use the I Fund in their porfolio.
- Trading and using ETF's has it's downfalls. Most folks have no idea of what differences tax considerations and commissions make when it comes to final computation of their return.
- The media is an investors worst enemy. The media brings doubt and anxiety into an investor's psych.
- It's the big trends that matter. Buying and holding the global market for the duration of the bull and selling out just before the bear is what I believe to be the Holy Grail to investing. Not one person on this planet knows how to get this simple concept right every single time.
- Whether you're "buy and hold" or "trade all day", all it takes is one good bear to steal your Mojo.
