[/caption]This is another topic that has been debated left-right-centre since... Geez, Adam and Eve I guess. Let's just go through the usual pros and cons. I will start with the Cons.
Cons
1. Doesn't help to make money
This has been highlighted various times in the papers. Someone who bought an index, say the S&P500 and held for the past 10 years would have made zero return. In some markets, you could have bought-and-hold for the last 20 years and still lost money. The best example being Japan. Buy-and-hold at any point over the past 20 years would have made negative return! So to hell with Buy-and-Hold right?
2. What about locking in profits?
If a stock has risen 100%, and knowing that stocks on average gives only 8%pa, this stock has already given you roughly 10 yrs worth of return, isn't it a good idea to lock in the profits? Especially if the stock intrinsic value is not going to grow by that much over time - meaning that it's grossly overvalued. We should sell when things are grossly overvalued, right? Read more...[caption id="attachment_1277" align="alignright" width="150" caption="Photo by Jef Poskanzer"][/caption]This is another topic that has been debated left-right-centre since... Geez, Adam and Eve I guess. Let's just go through the usual pros and cons. I will start with the Cons.
Cons
1. Doesn't help to make money
This has been highlighted various times in the papers. Someone who bought an index, say the S&P500 and held for the past 10 years would have made zero return. In some markets, you could have bought-and-hold for the last 20 years and still lost money. The best example being Japan. Buy-and-hold at any point over the past 20 years would have made negative return! So to hell with Buy-and-Hold right?
2. What about locking in profits?
If a stock has risen 100%, and knowing that stocks on average gives only 8%pa, this stock has already given you roughly 10 yrs worth of return, isn't it a good idea to lock in the profits? Especially if the stock intrinsic value is not going to grow by that much over time - meaning that it's grossly overvalued. We should sell when things are grossly overvalued, right? Read more...
[/caption]This is another topic that has been debated left-right-centre since... Geez, Adam and Eve I guess. Let's just go through the usual pros and cons. I will start with the Cons.
Cons
1. Doesn't help to make money
This has been highlighted various times in the papers. Someone who bought an index, say the S&P500 and held for the past 10 years would have made zero return. In some markets, you could have bought-and-hold for the last 20 years and still lost money. The best example being Japan. Buy-and-hold at any point over the past 20 years would have made negative return! So to hell with Buy-and-Hold right?
2. What about locking in profits?
If a stock has risen 100%, and knowing that stocks on average gives only 8%pa, this stock has already given you roughly 10 yrs worth of return, isn't it a good idea to lock in the profits? Especially if the stock intrinsic value is not going to grow by that much over time - meaning that it's grossly overvalued. We should sell when things are grossly overvalued, right? Read more...
Sorry – initially posted this on your blogspot blog.
The solution is to buy and hold the stocks of the highest quality individual companies you can indentify, acquiring shares as cheaply as possible.
Buy and hold and diversification (mutual funds, index funds, ETFs, etc.) is a disaster.
Buying and holding the best, most consistently profitable companies you can identify goes by another name – investing.
Detractors of investing in quality usually say that it’s easier said than done and then name some big, bloated, and bankrupt company with a formerly large market cap as an example.
But is it really that hard to identify a truly superior business?
The potential rewards are incredible for the patient and intelligent investor. In the U.S., investors who did nothing but buy shares of McDonald’s back in 1992 and then just held on for 17 years have seen their annual dividend increase to where it’s now approximately 25%.