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Just looked up some q&a's about oil investment.
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 Forex Brotherhood Review? |
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cheers, Davie.... |
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Retirement Indicator | Why do people still use "buy and hold" when it has proven to be so risky after losing 46% in 2000-2001? |
I would love to know why this is ok, when it is so easy to get out. |
 |
 
BigBen
 |
Buy and hold is not for everybody, especially those who want to use cash that urgent like for retirement or medical. it is more towards investors that can buy time in waiting their investment to give huge return.
and, buy and hold is not just about buying any stock at any price. the key to be successful is buying great stock at bargained price. and because the stock price fluctuates so much, correction and recession is just another opportunity to buy more shares. but have to be reminded, fundamental value have to remain intact.
since we are living in a capitalist society, the economy will keep on expanding and profits will subsequently keep on growing. One hundred years of stock market historical data support this fact; stock prices have consistently increased with a few recessions in between. Consequently, both stock prices and stock dividends will increase as well. |
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astatine
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2000-01 is precisely the reason why you buy and hold. Nobody has reliably perfected beating the market in the short term, and in the long term, the market has historically always come through. |
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Founder, MastersoEquity.com
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how many times in the 90+ years history of the Dow did 2000 to 2001 happen?
why do people still cross the street when it has proven to be so risky after 3 accidents in the same junction?
why do people still get married when it has proven to be so risky after 1 in 5 couples get divorced?
why do people still eat fish when it has proven to be so risky after there have ever been choking on fish bones?
Enough said.
http://www.mastersoequity.com
http://www.optiontradingpedia.com
. |
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Your #1 fan
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People lost money in those years due to the .com bust and 9/11. If you had bought many stocks during that time, you bought them at bargain prices. I am a long term investor. I am heavily invested in real estate and stocks. I stopped buying real estate in 2004 (end year) because the prices were too high despite the interest rates. It is a good time to buy because sellers are more desperate and interest rates are only slightly higher than before. Stockwise it is a wait and see game. This is a correction not a recession yet. I wouldn't buy stocks in banks unless the bank is merging. |
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jakewk
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The first answer to your question is because if you had looked for good companies with inexpensive valuations in 2000-2001, you would've made a lot more than 46% in the period in between. Look at all of the "dot-com" advertising firms that were left for dead until 2003(ish). I know many of them have returned 10X-20X (1000% - 2000%) since that point in time. Apple has gone from a split adjusted $9 to $125(ish). Buying when things appear to be their worst is a great investment strategy. I would love to be a mortgage derivative investment fund starting operations today. I know that I would make outsized returns starting from here forward.
Additionally, much of the returns in the market are random. You can never really predict the future. In that case, how do you really know when to sell? The truth is, you don't. For an individual investor that does not have time to pick optimal entry and exit points for all equities in their portfolio, it's much more efficient to make sure you're buying quality stocks at low prices all the time. Each stock represents an unlimited option to the upside and a B&H strategy exploits that value for a long-term investor. More sophisticated timing strategies require a much higher level of sophistication and time than any single retail investor can afford. I'm a firm believer that B&H is a good strategy for people who do not want to spend all of their time watching the market. |
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Box815
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Because market timing is a myth. If it were so easy then how come the big mutual fund managers aren't able to beat the S&P? |
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georgebonbon
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Dealing costs when buying and selling lose you money.
If you invest in a good company with a lot of mileage then buy and hold is the best policy by far. You only get taxed on the gains. Sell only enough to cover your capital gains allowance every year then buy it back.
No one can predict the bottom or top. |
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tlc
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Jim Cramer on CNBC says "Buy and Homework", as opposed to "Buy and Hold". If you know your stocks are tanking, and it is due to the fundamentals changing or something similar (an SEC investigation) get out of the stock! Trying to "time" the market is next to impossible, but hanging on to a stock that is no longer working is not going to work either. Problem is, to be a good investor, one needs to be up to date and pay attention to what is going on. I love CNBC, Jim Cramer and Fast Money.
Buy and hold worked when it cost hundreds of dollars to make a trade, but when a trade now costs $7 or so, trading costs no longer matter. |
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ianrothman
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The Dow Jones Industrial Average was at 10,863 on 12/31/99. By 1/2/02, it had dropped to 10,404.
But at the end of today's trading, 8/13/07, it's now up to 13,237. Selling on 1/2/02 would have made you miss out on a 27% increase. |
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