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Article Title:
The Demise of Buy and Hold

Article Description:
Based on consistent results I think Buy & Hold 
should be renamed Buy, Hold & Bye Bye.

Additional Article Information:
665 Words; formatted to 65 Characters per Line
Distribution Date and Time: Wed Mar  1 22:01:00 EST 2006

Written By:     Ulli G. Niemann
Contact Email:  mailto:[EMAIL PROTECTED]

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The Demise of Buy and Hold
Copyright ©  Ulli G. Niemann
Success Investment

Based on consistent results I think Buy & Hold should be renamed 
Buy, Hold & Bye Bye. It sounded great for a while, especially for 
the huge majority of investors who don't have the time or 
interest in really doing due diligence on investments. 

Investing, for some, might be just a hobby, but it can sure be an 
expensive one. Yet, if you're like many of us, you know there are 
opportunities for putting your money to work and having it grow. 
Nonetheless, investing, like any business (and it is a business) 
has its own unique challenges. Here are what I consider to be the 
top three.

1. Intelligently Deciding What to Buy

When it comes to Mutual Funds, there are today over 13,000 
choices. You're going to check out each one, right? Yeah, right. 
And even for those you do check out, what are you going to look 
at? Past performance. What else can you look at? But as it says 
on the bottom of every prospectus, past performance is no 
guarantee of future results. And in these days of cockeyed cooked 
books, past performance is barely a guarantee of past results! So 
you need to decide not only what to buy, but you have to be darn 
sure you know when to sell it when future results of an 
investment don't match your expectations.

Sure, there are investment rating services that provide a false 
sense of security to Buy & Holders. But the fact is that pretty 
much every investment that rating services have touted over the 
last few years has lost money. So much for depending on that sort 
of expert advice.

2. Determining When to Buy?

It shouldn't matter when you buy if you're never going to 
sell—but it does. If you buy just before the market falls, guess 
what: You will start with a loss that you have to recover before 
your investment begins making money. So what? According to 
statistics on mutual fund sales, most investors buy just in time 
to grab a loss. 

Buy & Hold may turn out to be a profitable approach if you intend 
to hold forever. But we don't live forever, and most people are 
going to want to sell their investments at some point before 
forever hits. It's small comfort to know that if you hold your 
investments for another 20 years, they will make money—especially 
if you're retired and want to take a cruise next month. 

3. Staying the Course.

It takes a strong stomach to hang on to an investment when you 
see it disappearing before your very eyes. Or even when it's up 
one day and down the next. (Like these days, for example.) And 
once you decide that having to wait for three decades before your 
investment gets back to square one is not such a great deal, what 
happens to your Buy & Hold strategy then? It's out the window and 
all you're holding is the bag. The much emptier bag.

So what's an investor to do, especially an investor who's really 
not a professional? For one thing, find a reliable method of 
gaining information. One that I like is a trend analysis approach 
that objectifies market behavior. This type of approach is more 
kinetic in that it doesn't rely on past performance—it relies on 
past and present performance to indicate a "trend" toward future 
performance. While that's not infallible in any sense of the 
word, it is a broader range of information than most guides.

Using one of those as a foundation for your strategy, determine a 
buy point and, most importantly, a sell point for any investment 
you make. Get comfortable with taking small losses before they 
turn into big disasters.

There is always risk in investing. However there are ways to 
minimize risk so you become an investor, not merely a gambler 
with high hopes for a Buy & Hold approach that many people have 
now found to have failed them.

© Ulli G. Niemann

Ulli Niemann is an investment advisor and has been writing 
about objective, methodical approaches to investing for 
over 10 years. He eluded the bear market of 2000 and has 
helped countless people make better investment decisions. 
To find out more about his approach and his FREE Newsletter, 
please visit:



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