jem makes the defining point here. How did buy and hold become such a mantra? Who's to say the market will EVER recover. What if the U.S. is 10 years away from being Argentina? The DIA took 26 years to break it's 1929 high. Anyone betting on Nikkei 38,000 anytime soon? Buy when you think there is viable opportunity, not just because it's been ingrained in the masses as the "right thing to do".
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Beating Buy and Hold
- Thread starter jj_jere@hotmail
- Start date
Buy & Hold? That's a strategy - really a marketing scheme - put forward by the Mutual Fund companies which profits them. Keep the money tied up and they get their cut. Buy and Hold appeals to the retail investor becuase it requires they do nothing.
It works well in secular bull markets but it appears that the secular bull of 1982-2000 has ended and we don't know if it will resume or if today's bear ending or is secular. You might end up buying and holding and retiring in a chicken shack.
Boucher's methodolgy is strict and simple and among other things requires understanding economic cycles, monetary policy, tracking equity sectors,and commodities and currencies and then searching for stocks, applying fundamental criteria first and then Oneill's breakout strategies - for longs. This also requires a not insignificant amount of research. But it works.
I think an equally good alternative would be to apply intermediate term timing strategies: combining sentiment indicators with intermediate and long term trend lines and major support/resistance levels and when your triggers are set go long SPY,DIA,QQQ or for short buy RYDEX short funds.
In the past 18 months there were at least several dozen stocks that experienced 400-500 % growth. Examining various small cap funds holdings can reveal some of these while they are undergoing thier advances. But they also had swift and sudden drops. Its turbulent out there.
Bon Chance!
It works well in secular bull markets but it appears that the secular bull of 1982-2000 has ended and we don't know if it will resume or if today's bear ending or is secular. You might end up buying and holding and retiring in a chicken shack.
Boucher's methodolgy is strict and simple and among other things requires understanding economic cycles, monetary policy, tracking equity sectors,and commodities and currencies and then searching for stocks, applying fundamental criteria first and then Oneill's breakout strategies - for longs. This also requires a not insignificant amount of research. But it works.
I think an equally good alternative would be to apply intermediate term timing strategies: combining sentiment indicators with intermediate and long term trend lines and major support/resistance levels and when your triggers are set go long SPY,DIA,QQQ or for short buy RYDEX short funds.
In the past 18 months there were at least several dozen stocks that experienced 400-500 % growth. Examining various small cap funds holdings can reveal some of these while they are undergoing thier advances. But they also had swift and sudden drops. Its turbulent out there.
Bon Chance!
I believe buy and hold is in large part a marketing scheme / customer management tool. It's easier for the customer because he doesn't have to bother with the attending to his assets and it's easier to manage an account if the customer is not present. Buy and hold hasn't worked very well for the last two years. Maybe it will start working again now? "I hope so". LOL
The seasonal timing system I mentioned basically gets the buyer in at the beginning of November and out at the end of April. That is really all you have to know about the entry and exit, but the actual system refines those dates even further. You can obtain better performance yet.
I recommend reading Sy Harding's outstanding, low cost paperback book, <I>Riding The Bear</I> to fully understand the system. It was published in March 1999. From the pre-crash publication date alone you can see that the book is NOT another attempt to exploit the beaten and confused investor. Sy explains everything very well. This makes the book a fascinating read. I subscribed to Harding's newsletter for the past year. If you want to take the system performance even farther than the book, then the newsletter will interest you also. Just using the seasonal timing system alone is enough, however.
As for Buy & Hold, here is a new story: <I>Buy and Hold Strategy Loses Favor</I> The story ends with an interesting example showing how indexing underperforms investing in the right large caps.
I recommend reading Sy Harding's outstanding, low cost paperback book, <I>Riding The Bear</I> to fully understand the system. It was published in March 1999. From the pre-crash publication date alone you can see that the book is NOT another attempt to exploit the beaten and confused investor. Sy explains everything very well. This makes the book a fascinating read. I subscribed to Harding's newsletter for the past year. If you want to take the system performance even farther than the book, then the newsletter will interest you also. Just using the seasonal timing system alone is enough, however.
As for Buy & Hold, here is a new story: <I>Buy and Hold Strategy Loses Favor</I> The story ends with an interesting example showing how indexing underperforms investing in the right large caps.
Why not Buy & Hold a great dividend yielding stock? I daytrade and swing trade but I always put earnings into the dividend yielding guys.
For instance, MCIT is yielding 30% right and is at an all-time low due to Enronitis fears. SO, a stodgy utility company is yielding almost 6% and has similar returns in capital appreciation to GE. NPK, which makes cookware and bullets, is yielding 10%, is cash flow positive and cash per share equals current share price.
I mean, am I mistaken in this strategy?
For instance, MCIT is yielding 30% right and is at an all-time low due to Enronitis fears. SO, a stodgy utility company is yielding almost 6% and has similar returns in capital appreciation to GE. NPK, which makes cookware and bullets, is yielding 10%, is cash flow positive and cash per share equals current share price.
I mean, am I mistaken in this strategy?
vishnu- that is a good answer and something I have not really thought about. Now if you could give me a nicely diversified list I would know where to put some money. Although I am suspicious that the market would let a viable company yield 30 percent you are right there probably are some dividend plays right now.
What a coincidence that you should mention MCI. The fallen stock price has many investors worried that the company will suspend the dividend payments. This makes a lot of sense because the RBOCs began offering long distance service quite some time ago. Their market share continues to increase while MCI's market share erodes.
The same erosion applies to Sprint. I had them as my long distance carrier for at least a dozen years. When Southwestern Bell began offering long distance service last year I switched to SWB as my long distance provider to simplify billing. There is no significant savings by using a different provider such as MCI or Sprint anymore.
To show you how well known this issue has become, it is being discussed this weekend during a Bloomberg interview. If you have access to that financial channel be sure to watch it. The interviews repeat every hour or two, so you will catch it sooner or later.
The same erosion applies to Sprint. I had them as my long distance carrier for at least a dozen years. When Southwestern Bell began offering long distance service last year I switched to SWB as my long distance provider to simplify billing. There is no significant savings by using a different provider such as MCI or Sprint anymore.
To show you how well known this issue has become, it is being discussed this weekend during a Bloomberg interview. If you have access to that financial channel be sure to watch it. The interviews repeat every hour or two, so you will catch it sooner or later.
Here's are examples of Buying an index on April 28th and Selling on October 28th over the last 15 years.
DJI 150%, the off period was a -1%.
SPX 129% with the off period 6%.
NDX 184% with the off period 28%.
Pretty impressive, will it continue? These results were computed by daily log normal changes.
JJ
DJI 150%, the off period was a -1%.
SPX 129% with the off period 6%.
NDX 184% with the off period 28%.
Pretty impressive, will it continue? These results were computed by daily log normal changes.
JJ
I Just read an article in todays Sunday Denver Post about a morningstar study that said buying the funds which had the largest outflow of money in the previous year outperformed the average stock fund 70% of the time for the following three year period. I like that they used moneyflow and not past performance. The idea being a contrarian approach based on the investment communities uncanny ability to consistently be on the wrong side. Just a little tidbit to share.