Buy & Hold is a Losing Proposition

When it comes to investing in the stock market, especially during current times, investors should know when to hold on to stocks and know when to unload them.

Most financial experts believe that the buy-and-hold strategy of the traditional 401k methodology is a thing of the past if you want to gain the system. Buy and Hold which requires investors to buy stocks and then keep them for the long term has actually lost money over the last 10 years according to the S&P 500. The rational behind the “buy and hold” strategy is that, while the markets will likely experience ups and downs stemming from numerous factors, over time the stock markets tend to push upwards. Which means that those who use the buy-and-hold strategy stand to make money over time. This method has worked well for momentum traders that exit at the right times but leaves the rest of novice investors in the lurch.

While there are many experts who still hold to this Fortune 500 diversified strategy, others point to some of the more catastrophic stock market crashes of the past as proof that investors can literally lose everything they had gained in a bull market to the impact of the bear market. US economy of 2008 is proof positive.

Consider those who lost all their wealth during the stock market crash of 1929, which ushered in the infamous Great Depression. Many of the people who, back in the 1920s, held to the buy-and-hold strategy were the subject of riches-to-rags articles in newspapers worldwide. There is money to be made in today’s time, but timing and accuracy is more important than ever.

Experts say that bear markets materialize about every four or five years and bear markets can easily eliminate gains made in bull markets. History has proven this over and over. But for the ten year buy hold patterns we have beared witness to different results.

One researcher mentions that bear markets have hacked portfolio values an average of nearly 40 percent. This figure the buy-and-hold crowd would do well to consider and take notice.

Rather than adopt a buy-and-hold strategy, some financial professionals recommend that investors take a more sophisticated approach to buying and selling stocks. This necessitates monitoring market conditions and making changes as fluctuations in the markets warrant change. This is better known as trading the momentum and buying low and selling high. Ride the rips and sell the dips. This can be accomplished with the right data and the right market timing from Stocknod.com alerts.

Investors should also be wary of the advice they adhere to. While experts do provide a wealth of information on the markets and on individual stocks, it is up to investors to sift through the data and ultimately make the decisions.

Some investors choose to go with a broker so as to bypass the pressures of managing their own stock portfolios. Doing so requires them to look around for a good broker, one who has a proven methodology and a solid track record.

When all is said and done, however, investors are advised by a number of experts to avoid the buy-and-hold strategy still advocated by some on Wall Street. While patience is a virtue, investors should also reflect on how past stock market crashes burned those who held on too long. Team up with Stocknod stock alerts or the HotSheet for today’s bullish stocks.

Read the latest Free Investing Tips  from Stocknod expert Gregg Andreski

Securities Analysis 101

The goal of any financial analyst or stock technicians is simple: to beat the market. This victory metric is typically measured against the S&P 500.  This goal is basically boiled down to ones ability to predict the direction of the stock market and identify undervalued stocks that are poised to outperform. This may sound like a simple concept, but where it becomes murky is within the debate on which values are to be used in this determination. For example a fundamental analyst would insist that this underlying value can be determined best from the forces that affect the economy, industry groups and related companies. Essentially identifying the supply and demand forces that affect the stocks prices for the products & services offered. While a technical analyst will attempt to forecast future price movements based on examination of historic price movements.

 So which theory is best? Which strategy produces higher returns?  As a contributor of Stocknod my answer is both types of analysis should be used when analyzing securities, as the two strategies compliment each other in a full evaluation at both the micro and macro levels. To expound on this let’s look further at the question of whether markets are efficient. Just what is dictated by the current pricing of a security? Is the current pricing a fair market value? Or are there underlying forces that exist that have somehow skewed pricing? These are the questions and opportunities that we must uncover to identify the stocks that are undervalued and subsequently poised to outperform.

An “efficient market” in the academia level is defined as a market in which the price is an unbiased estimate of the true value of the investment. Simply stated, the current price of a security fully reflects all available information and is the fair market value. “All” being the sum value of all views whether bull, bear, or other held by market participants. It is a fair value based on the supply and demand value of the market. Any deviations above or below what is deemed as “fair value” is considered to be random and over the long term will reflect the true value. So it is this period of deviations where the opportunity exists in making profits trading stocks. So in short, the goal of any trader is to identify these existing anomalies or potential future anomalies and move in and out of the market accordingly. These anomalies will disappear almost as fast as they are identified and again is primary reason that Stocknod alerts have been such an effective trading tool in staying in tune with pricing strikes.

Most within the academia realm believe that security prices are deemed as “semi-strong” efficient. Remember by semi-strong we are referring to the fact that public knowledge is factored into the stock prices and it is relatively difficult to identify these deviations from the true value based on public information. And only new information should affect the price. Reviewing price reaction to breaking news, there seems to be evidence to support this theory. The flow of information and detection times have been increased due in large part to the internet, and market news are factored into the pricing almost immediately. Few will argue that a surprise, either negative or positive will drastically move the price of a security. I think we can all attest to this fact based on popular case history. experts