Before expanding to the questionable value of "buy and hold", it's actual probably best to take a deeper look into who's spending their millions of dollars of marketing money convincing you that "buy and hold" is the best idea and exactly why. Go here to learn more about 8I Holdings.
"Buy and Hold" Promoters
Companies at this point since they seem to have the deepest advertising pockets and they are highly visible in their promotion of "buy and hold".
Mutual funds have a strong vested fascination with having you buy into the "buy and hold" mentality since their entire business model depends upon the typical investor keeping their money parked... through good times and bad.
Remember, the mutual fund companies are earning a profit from your investment even while you are accepting profits / losses!
So "buy and hold" is really the greatest investment strategy available, it's actual just a matter of perspective. If you like that your mutual fund company profits while the Bear Market ravages your account value, then "buy and hold" is for you!
So let's look at some data to see how this really works.
"Buy and Hold" Information
Between 1929 and 2002, there have been 14 Bear Markets by having an average of 39% slashed off the value of stocks. During this 74 12 months period, it took an average of a few. 5 years to return to breakeven!
Every time a "buy and hold" investor loses money in a down market, they lose invaluable time to reaching their financial goal. After eliminating overlapping Bear Markets, 41 years were spent suffering through a Deal with Market or returning to break even.
Quite simply, "buy and hold" investors spend 2/3 of their time in order to break even!
"Buy and Hold" Myths
My favorite myth or scare tactic used by investment gurus is normally; "buy and hold" investing is critical since you cannot afford to miss the bull run when it hits. And they also carry on to cite what happens to those that miss the "big days".
Ah... good point, what does happen? If you would have invested $100 in 1926 and just left it there until 1993, your investment would have climbed to $80, 000. On the other hand, if you had tried to time the market and missed the 30 best months, your investment would have only been worth $1, 200.
"Buy and Hold" Does Work Better?
So I've just convinced you that "buy and hold" does work better right? But what would have happened if you used market timing and missed the 30 best months and missed the 30 worst a few months? Your expense would now be worth $120, 000 or 50% greater than simple "buy and hold".
Not to get too carried away but if you had avoided the 30 worst a few months and still managed to hit the 30 best a few months, your expense would have increased to an astronomical $8, 600, 000. Now I'm not going to try to convince you that market timing is going to hit every winner and miss every loser but I also don't think it's fair for the "buy and hold" advocates to represent only one side of the equation to their benefit either. For more info visit Hemus Pacific.
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