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

US Economy November Analysis

Global business sentiment is as dark as it has ever been since the 1930′s, although the free fall in confidence may be temporarily truncated by the Obama cabinet selections. Some are even fearing the worse of the glooming fear of the stock market crash of 1929.  Our survey results have been broadly unchanged since early November. Pessimism is pervasive across the world, with the only distinction being that Asian businesses are somewhat less nervous than elsewhere. Equipment and software investment did fall last week to a new record low, as did demand for office space and sales strength. Pricing pressures and interest rates are falling rapidly, although they are not yet consistent with outright deflation. The global economy is suffering a severe recession according to the business confidence survey results.

There was nothing but gloom and doom in the release of November U.S. economic reports. Economic headwinds are expected to have retailers expecting a slow holiday shopping season. But early indications per Black Friday only 1.6% lower than 2007. These are numbers we hope to see consistent through the remainder of the holiday shopping periods.

Construction spending for September came in at $1.060 trillion, a decline of 0.3% from August and down 6.6% from September 2007 as total construction—particularly for residences—continues to decline in the wake of a declining economy. We can expect the continued ripple effect of the home mortgage crisis to continue to hit the construction sectors.  Private construction increased by 0.1% for the month, but private residential construction fell by 1.3% from August to September. Total public construction also fell for the month. With the financial crisis still restricting credit to new projects, total construction will most likely decline in the coming months also. Expect construction related sectors to feel the first blow of initial first year recession waves.

The Institute for Supply Management’s manufacturing index fell 4.6 points to 38.9 for October. The larger than expected fundamental analysis decline puts the ISM index at its lowest level since the early 1980s. Conditions for manufacturing were very restrictive in October. Businesses’ and consumers access to credit was essentially cut off, leading many to reduce overhead, employment and production. The ISM index is consistent with an economy in a severe recession and opens the door for the Federal Reserve to lower interest rates below 1%. 

The U.S. personal income report revealed a bigger-than-assumed 0.3 percent October gain, although the increase followed sizable downward third-quarter revisions that were revealed in the third-quarter GDP report released Nov. 25. We also saw the expected 1.0 percent drop in October consumption, but a much-weaker-than-expected -0.5 percent figure in real (inflation-adjusted) terms, as personal consumption expenditure (PCE) chain prices fell “only” 0.6 percent in October. The real consumption shortfall implies a hefty 2.4 percent fourth-quarter rate of decline alongside a 7.1 percent rate of decrease for nominal spending, and a much-stronger-than-assumed 4.2 percent pop in the fourth-quarter GDP chain price measure, as falling import prices are slow to “pass through” to consumption. We now project a big 4.0 percent real GDP decline in the fourth quarter.

In summary the US Economy is right where we would expect it to be during this quagmire, and the Obama administration has done much to put a tunicate around the financial and stock market bleeding. But we can expect unemployment to grow to 11-12% and slowly start feeling the stronger waves of recession until consumer confidence and fundamentals have been restored. The NASDAQ and other majore indices are showing a modest recovery.