The ridiculousness of "Holding" during a bear market.
Okay, so the stock market has been taking a massive dump. I've been watching this bear market unfold since Sept. 07' and luckily I've been mostly out of the market since then. In one year it's been nearly impossible to make any money (by conservative means, not gambling on individual stocks or shorting them). All indexes YTD show between -15%-20% performance. If you're one of the unfortunate ones that haven't gotten out of the market, be prepared for worse.
Here's why:
Global Economy - Euro indexes are in the dump, China and India economies are receding -
Domestically, we have our own inflation worries to deal with, mortgage/credit crisis, with more bad news on the way, the worst is not over yet.
I think it's ridiculous for these advisors telling people to hang on, to hold on to investments when we've clearly have at least 12-18 months for recovery.
Here's something that would make it more clear for you if you're not catching my drift... If you had a 100k invested in some index fund in Sep of 07, you'd probably have 80k left today. My guess is if you keep what you have left invested, in about 6-12 months, it'd be worth about 65k.
What is the pyschology behind holding on to losing investments?
"The Buy and Hold strategy suggests investing in high-value stocks or mutual funds and leaving them in place long term based on the assumption that, over time, the market increases in value. The investors who employ this strategy assume that since the market will increase in value over time, their investment will too."
What a crock... I'm not saying it won't work, but there's nothing worse than watching thousands of dollars go *poof* in a matter of days. Here, just let me open my wallet and hand you several hundred dollar bills.
Anyways, I leave you with that thought to chew on. I'll have more to add when I'm a bit fresher - about my experience with market timing and investing on momentum. It doesn't work for everyone, but has worked for me. I've been lucky to get in on the 90's .com market boom, then to get out before the crash. I was also lucky enough to get in during the 2k's real estate boom and then out before the crash. Luck? probably not. Skill? definitely not. Common sense? absolutely.
posted by LouiSurfer @ 9:07 PM
1 comments
1 Comments:
Of course, you are very right. The buy and hold "wisdom" is preached by those who did not live through (or probably even study) the great crash of 1929. The reality is that it took many, many years for people to come back to where they were at the top in the 1920's. During strong economic times, yes, things will come back more quickly, but not during a major decline that we might be in. Check out the Dow graphs yourself. Only a fool falls for this buy and hold nonsense, although it is certainly a little late now. These experts, every day, are reported "taking their profits", or "buying into weakness" --- if they are buying and holding, how does it happen that they take profits or reinvest at lower pices? They are not buy/holders. Suckers are. And that keeps the brokers with clients all the time. If you step on the sidelines for a year or so during a large bear market, they lose a customer. Hmmmm. Too late now to step aside, that may be true, but to have stepped aside as you did from Sept-Jan would have made sense. Good for you for questionng this nonsense that is ruining people's financial lives!! Not mine, though.
Bailed Out, Too.
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