Buy and Hold Investment FallacyThe fallacy of the "buy and hold" strategy continues it's prevalence in the stock market investment community and I'm continually bewildered why anyone is still listening to this load of garbage. Investment memories are notoriously short so it's no surprise that the average investor has forgotten all about 1972 and beyond much less any period before that. But what about the 2000 through today? Has the average investor really forgotten about the devastating affects that "buy and hold" had on their investment since then? So who is promoting this "buy and hold" strategy and what's in it for them? Buy and Hold PromotersAs an investor with a diversified portfolio, I receive annual reports from many different sources. A couple of the more glaring reports I received recently were from Janus Funds and Aim Funds. The Janus Funds report was particularly galling to me since it showed a positive return of 1.82% yet upon further investigation, the reality is that I LOST 12.4%. The Aim report caught my attention for the extreme lagging of their benchmark indices yet their insistence that "buy and hold" remains their recommended strategy. Why of course it does...that's how they get paid! It doesn't matter how they perform as long as they have your money then they make money. This is a fantastic deal for them so you can understand why they continue to spout off about "buy and hold". After all, doesn't "buy and hold" sound so much better than "we make money even when you don't"? Buy and Hold Numbers - The TruthAs an experiment to validate my claims of "buy and hold investment fallacy", I went to the large mutual fund websites to look at their "buy and hold" performance numbers and what it would mean to your investment if you had been unlucky enough to follow their investment advise. Now, since we do not have a multi-million dollar "research budget" like Janus Funds does to (as their commercial claims) check into every hotel room, call travel agents, confirm reservations, etc, etc. I kept the project as simple as possible while still being accurate and fair. The Evaluation Process
It would be too easy and unfair to "pad" these performance numbers by "cherry picking" the worst funds so I didn't do it that way. I wanted you to be able to follow the same simple steps and come to the same basic conclusion. If the numbers were padded, the comparisons would quickly show the bias. All the raw mutual fund data is also published for you to review and search for inconsistencies.
Now It Gets Interesting!At this point, the skeptics are saying, "hindsight is 20-20 but how does the average investor, or even the professional investor, know when to shift their money to properly time the stock market"? It's true, stock market timing is difficult! But what would've happened if we took the same mutual funds and did a little stock market timing? What about looking at the results of some BAD stock market timing with these mutual funds? New Evaluation Process
So this means that you will not be avoiding the 1st year of pain and the 1st year of gain, which are often the largest movements in either direction. In other words, you will not be on the cutting edge of stock market timing. In fact, you will be more on the trailing edge. Certainly something no "hot shot" mutual fund money manager would ever brag about. You're going to sit by and watch as that 1st year Bear Market runs right over your stock portfolio and the Bull Market runs right past your stock portfolio. Sounds bad doesn't it? But what really happens is that by applying even a little bit of stock market timing, even a little bit of BAD stock market timing, you've come out ahead in every mutual fund listed but the Janus Fund. And that's only because the Janus Fund lost so much their first Bear Market year....a whopping loss of -43.42% before sales charges! Take a look at the comparison charts below with the bad stock market timing applied:
Buy and Hold Truth RevealedThe graphs above clearly show that idly sitting back and going with the "buy and hold" crowd can be disastrous to your stock or mutual fund portfolio. These "market timing" examples show what just a little bit of effort can do for your investment returns. Most investors can perform the stock market timing with a little more accuracy than waiting for an entire year in either direction. But this demonstration was really done to show you that even if you're not on the cutting edge, you can still benefit from a little stock market timing. To get the most out of your investment, we believe that a stock market trading system is essential. This is where we can help you! By using the Investment method, you'll be able to out perform the S&P 500 by an average of over 400% annually. Call us today to learn more about how we can help you succeed like never before. Learn More - For FreeLearn more about the fallacy of "buy and hold" and other important aspects of stock market investing with our free investment book - Learn how the stock market cycles can destroy your total investment return or make it grow like never before!  Start Earning Profits in Both DirectionsCall Us Today
Toll Free (877) 554 - 4800 It should not be assumed that future recommendations will be profitable or will equal the performance of the past.  Learn from the Past to Earn from the Future!Main Menu Articles
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