Stocks Buy, Hold and Hope Strategy

The majority of investors in America today are unwitting proponents of the buy, hold and hope strategy. They are heavily invested in equities on a "long term basis" and are not concerned about the daily (or weekly, or monthly, or yearly) ups and downs of the market because they rest easy in the knowledge that the market will go up over the long term. So they buy 'em, hold 'em, and are confident or hope that everything works out all right.

But how long is the long term anyway? 5 years? 10 years? How about 20 years? And how comfortable are these investors when the market is actually going down for extended periods of time? Let's look at some data to try and put this buy, hold, and hope strategy into perspective. The following table shows the major down moves for the Dow Jones Industrial Averages in the past 100 years:


The data shows four periods where the market fell anywhere from 36% to 89% and required 5 years to 25 years to recover. Looks like the long term investor during those periods had to wait several years just to break even (and required a lot of intestinal fortitude as well). If you think this is a phenomenon of the past, look at the last row on the chart. We are currently at 3 years and counting, waiting for the market to get back to breakeven from the 2000 peak.

If someone told you that you may have to wait 5 to 25 years to breakeven on your investment strategy would you be a willing investor? I doubt it. But that is exactly what millions are doing with their buy, hold, and hope strategy - that is what you call a losing proposition and is not how some savvy investors potentially make money.*

This is another reason for considering alternative investments for a portion of your portfolio, such as a good trading system that has the potential to provide superior returns in non-correlated markets.*

Good Trading.

p.s.  If you liked this article by Mr. Bill Poulos, then you need to  CLICK HERE   to unfold his step-by-step trading BLUEPRINT...


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*Disclaimer: Futures, forex, stock, and options trading is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using the information in this article will generate profits or ensure freedom from losses.