So
much of what you hear in the financial press these days is so wrong
that one most financial television and print should consider only
strictly for entertainment purposes. In this article we examine one of the great lies constantly cycled, the myth of Buy and Hold.
"Buy a stock or mutual fund and hold him through thick and thin for 30 years and you will make money," they say. "On an annual basis, the market goes up a little less than two thirds of the time. More than 5 years, it goes up to ¾ of the time. More than 30 years, you are virtually assured of a positive return."
They spout these statistics because the financial sector is entirely dependent on buy and hold. With a buy and strategy, your broker did not know how to manage money or to monitor your portfolio. All he has to do is sell you more products and collect its mission, or more recently, a large percentage of your portfolio as a "management fee. "
In a perfect world of ever rising stock prices, buying and holding would be a feasible plan, but the real world tells a different story, a sad story of the consequences of blindly following a buy and hold strategy.
Here are the tragic facts:
* $ 100,000 invested in the S & P 500 in January 2000, was worth $ 84,901.72 in January 2006.
* $ 100,000 invested in the Nasdaq 100 in January 2000, fell to $ 44,370.97 per January 2006.
* The average recession in the United States drops major U.S. equity indices 43%.
* The NASDAQ decline from March 2000 to October 2002, a 461% gain needed just to break even.
* From 16 major national stock exchanges, investors would be guaranteed only five positive annual return for each period of 20 years in the past century.
At best, buy and hold investors are treading water for the last six years, and by treading water, they are actually going backwards as the Consumer Price Index is already up by an average of 2.5% per year. But it would have looked like a really good deal. For many investors, treading water
They were the people who put their nest eggs implode viewed by as much as 80% between 2000 and 2002, while their brokers and mutual fund managers did nothing to save them. Retirements were destroyed, millions had to return to work, dreams were put on hold. Families suffered and still suffer in real and tangible ways.
And today many say that The Millennium bear market of 2000 can not happen again. But it has happened before and will happen again! Between 1972 and 1974, the Nasdaq fell 60% and remained down until April 1980. Eight years of negative returns.
Not to mention the Nikkei Index. Dow to the crash of 1987 or the fourteen year bear market Make even without a head drop, U.S. stock returns over the past five years are negative when factored for inflation.
The only sensible solution for an investor today is to protect, feed themselves and find a better way to his wealth and grow. There are a number of proven options available, but the absolute worst thing one can do is listen to the experts who tell you to "buy and hold."
Copyright 2006 Equitrend, Inc.
"Buy a stock or mutual fund and hold him through thick and thin for 30 years and you will make money," they say. "On an annual basis, the market goes up a little less than two thirds of the time. More than 5 years, it goes up to ¾ of the time. More than 30 years, you are virtually assured of a positive return."
They spout these statistics because the financial sector is entirely dependent on buy and hold. With a buy and strategy, your broker did not know how to manage money or to monitor your portfolio. All he has to do is sell you more products and collect its mission, or more recently, a large percentage of your portfolio as a "management fee. "
In a perfect world of ever rising stock prices, buying and holding would be a feasible plan, but the real world tells a different story, a sad story of the consequences of blindly following a buy and hold strategy.
Here are the tragic facts:
* $ 100,000 invested in the S & P 500 in January 2000, was worth $ 84,901.72 in January 2006.
* $ 100,000 invested in the Nasdaq 100 in January 2000, fell to $ 44,370.97 per January 2006.
* The average recession in the United States drops major U.S. equity indices 43%.
* The NASDAQ decline from March 2000 to October 2002, a 461% gain needed just to break even.
* From 16 major national stock exchanges, investors would be guaranteed only five positive annual return for each period of 20 years in the past century.
At best, buy and hold investors are treading water for the last six years, and by treading water, they are actually going backwards as the Consumer Price Index is already up by an average of 2.5% per year. But it would have looked like a really good deal. For many investors, treading water
They were the people who put their nest eggs implode viewed by as much as 80% between 2000 and 2002, while their brokers and mutual fund managers did nothing to save them. Retirements were destroyed, millions had to return to work, dreams were put on hold. Families suffered and still suffer in real and tangible ways.
And today many say that The Millennium bear market of 2000 can not happen again. But it has happened before and will happen again! Between 1972 and 1974, the Nasdaq fell 60% and remained down until April 1980. Eight years of negative returns.
Not to mention the Nikkei Index. Dow to the crash of 1987 or the fourteen year bear market Make even without a head drop, U.S. stock returns over the past five years are negative when factored for inflation.
The only sensible solution for an investor today is to protect, feed themselves and find a better way to his wealth and grow. There are a number of proven options available, but the absolute worst thing one can do is listen to the experts who tell you to "buy and hold."
Copyright 2006 Equitrend, Inc.
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