Buy and hold or market time?

[ebisky]

Buy and hold is an old idea that doesn't pertain to today's markets.

Even the king of buy and hold, Warren Buffet, doesn't really support the idea in today's markets.

Read the book, "Trend Following: how great traders make millions in up or down markets".

-E

 

[preben]

Audrey; we follow very much the same approach - and I certainly call myself a buy-and-hold investor (except for a few % in seperate account for gambling! ).

I have been using the calender year for re-balancing only but want to move towards an "out of range" re-balancing method too. Can you clarify what you do? 5%? Are you only refering to stocks vs bonds (I.e. a shift from say 50/50% to 55%/45%?) or in between subclasses(value/foreign/EM/small Etc.).

Cheers!

 

[d]

Buy and hold is an old idea that doesn't pertain to today's markets.

what, then, would you suggest for a near-idot like me who is unable to predict the future of the markets?

 

[mathjak107]

buy and hold in individual stocks never..............buy and hold in diversified mutual funds always

 

[ebisky]

Buy and hold is an old idea that doesn't pertain to today's markets.

what, then, would you suggest for a near-idot like me who is unable to predict the future of the markets?

Have someone else manage your money or be in for a HUGE learning curve for personal investing.

Or as others have said, invest in mutual funds and/or index funds. If you want to make a higher return, look into Exchange Traded Funds (Just as the name implies, they are funds traded on an exchange). You can diversify between a few.

They follow industries/sectors, which will allow an investor/trader to put money into a whole industry instead of one company within an industry. Profit potential is greater, but risk is as well. This route requires greater knowledge in investing/trading. I'd consider ETFs as a few steps above a fund in terms of risk, yet a few+2 steps below individual stocks.

http://finance.yahoo.com/etf

-E

 

[bpp]

buy and hold in individual stocks never

Why not?

Bpp

 

[mathjak107]

individual stocks are tough to buy and hold unless you have enough to actually be a little mutual fund .....i find im not smart enough to pick just the right company at just the right time in the right sector and even if i got the first part right i still have to worry about what the competitors are doing and of course there is still market risk to contend with....lets not even mention a bad earnings report that sends you down 20 or 30%. even when the markets rising....i found when i bought individual stocks i averaged far less than my mutual funds which just keep chugging along over the last 20 years...

 

[bpp]

individual stocks are tough to buy and hold unless you have enough to actually be a little mutual fund .....i find im not smart enough to pick just the right company at just the right time in the right sector and even if i got the first part right i still have to worry about what the competitors are doing and of course there is still market risk to contend with....lets not even mention a bad earnings report that sends you down 20 or 30%. even when the markets rising....i found when i bought individual stocks i averaged far less than my mutual funds which just keep chugging along over the last 20 years...

Ok.

I actually do try to create my own little mutual fund, with my thinking going like this: if I believe in efficient markets, than I don't need to pick the right stocks at the right time, I just need to pick a (semi-)random bunch of stocks at any time, and the market will on average price them in some reasonable manner.

You do need to be willing to accumulate lots of tiny little holdings to do this, or else you will end up with an unnecessarily risky lack of diversification. But if you do buy-and-hold, you can make your effective expense ratio almost arbitrarily low. (My real reason has to do with tax and asset location issues, but the cost savings are some compensation for the added paperwork involved.)

Bpp

 

[mathjak107]

my friend joe was a big believer in buy and holding individual stocks ..why? because his mom 30 years ago had bought a bunch of blue chips thrown the certificates in a drawer and became a wealthy woman....i said joe this isnt your mothers stock market anymore those days are over.he would argue the point...well low and behold joe was a big buyer of lucent.needless to say joe took a bath.,..
the other thing was i said how do you know your mother did well.his answere look how much money she left in stock....
i said lets run the numbers as best as we can  on the stocks.....joes moms return overall ,around 6%..........even an index fund would have beaten her return without breaking a sweat.......
today i think most buy and holders of individual stocks do so just because they have no real interest in watching the market,it just seems like a good idea.....

 

[mathjak107]

if you can buy enough individual issues to give you enough diversification to actually become part of the efficiant market as opposed to a speculator in a stock then its okay....my problem was i even tryed the dogs of the dow theory......buying the 10 highest yielding stocks in the dow....except for altria and exxon the other 8 died a horrible death the last few years...im glad i got out when i did

 

[bpp]

if you can buy enough individual issues to give you enough diversification to actually become part of the efficiant market as opposed to a speculator in a stock then its okay....my problem was i even tryed the dogs of the dow theory......buying the 10 highest yielding stocks in the dow....except for altria and exxon the other 8 died a horrible death the last few years...im glad i got out when i did

10 is way too few. I think you need to have at least 30-50, and should really aim for as many as possible. I make it a rule never to buy the same company twice. All new money and reinvested dividends go into new names.

Bpp

 

[unclemick]

Yawn!

To repeat once again: 75% Target Retirement 2015 and 15% individual stocks.

Is 75% balanced index - buy and hold, market timing cause they rebalance automatically, or slice and dice cause they hold mutiple asset classes Do I really care? Nope - current yield is enought to live on in hard times and 5% of year end portfolio value is enough for it's part of funding ER.

15% individual stocks is male, hormonal, and if I go go broke I'll be pissed off but not pissed on(broken as it were). If I done good - well that's a little lagniappe.

My philosophy is all over the map in stocks - from high div to high growth - a mish mash that floats my boat. Will try to get down to 20 stocks and less than 10 DRIP plans by the end of the year - I hope. I do have a mental bias toward Norwegian widow/Ben Graham middle of the road -div/div growth boring stocks.

The old academic curves used to show a hard right turn at about 4 stocks or so - haven't seen any lately.

Lucky 13th year of ER and different than prior years holdings - switching from Lifestrategy(60/40 ish fixed) to Target and canceling DRIPs with reinvested divs toward more div growth since current divs seem to be in a popular cycle. Looking for more growth dogs - me.

heh heh heh heh - random first cup of coffee thoughts - subject to change.

 

[maddythebeagle]

well low and behold joe was a big buyer of lucent.needless to say joe took a bath.,..

Oh, there we go again bringing up Lucent, etc. as a reason that buy and hold of individual stocks doesnt work. I owned Lucent and some other tech. stocks and sold and made a profit. There certainly was enough info. out there that people saw the problems early. I think the problem that a lot of individual investors have is that they hold thinking to recoup their paper losses in these titanics and also wont buy when prices are low. Buy and hold works great for Buffet/Lynch type stocks that you buy at a reasonable price.

 

[Jarhead*]

Ya little lagniappe.

O.K. UncleMick, you Cajun Dandy.

It's raining again today, and no golf, so have a chance to waste (your time)

Couldn't stand it anymore, so I finally looked up the meaning of "lagniappe".

"Used primarily in So. LA. :

"A small gift given a customer by a merchant
at the time of purchase".

Makes sense now.

 

[astromeria]

Why, I got a lagniappe just a couple of weeks ago <hmm, sounds riske'>. Bought a T-shirt from the Turtle Project (protecting sea turtle nests on the beach) for $17 and they tossed in a Turtle Project key chain. Laissez les bon temps rouler!

 

[mathjak107]

i consider my fund portfolio my real investments and the individual stocks i buy my speculations.......although i have made money over the decades with my individual stocks the gains arent even close to my fund portfolio.....of course im not taking all the credit for the funds performance as im a long time subscriber to fidelity insight..non the less 100,000 in 1987 is now 1.1 million ...i think i averaged about 6% or so when all was said and done on my individual stocks....not great growth but certainly alot more fun than funds .