Buy and Hold is Dead

A couple of weeks ago I wrote an article asking the question “Is Buy and Hold Investing Dead?” And I got an over whelming response. Most people said “Yes, buy and hold is dead”.

Regardless of your opinion on this, things are going to be different moving forward. The way people look at their finances has changed. In the years to come, the world economy… investing… financial planning… will never be the same.

First of all, “Buy and Hold is Dead” because it was never really born to begin with. It is really just a huge misunderstanding. It was never meant to be interpreted as buy and go to sleep.

Great investors like Warren Buffet, who are “buy and hold” investors, never turned their back to the market, an industry or a company!

“Buy and Hold” was a phrase for promoting patience with an investment. Somehow this patience turned into a nap, and then a big sleep for many investors. Before we knew it, we had two generations of investors that just threw their money at the market with no real strategy at all!

In addition, this is not a buy and hold stock market right now. It appears that the market has established a base and may have bottomed, but as I stated in my previous article there will be no quick recovery and it may be long time before we see the (SPY) S & P 500 at 1500 net of future inflation.

We are probably going to see a reflationary recovery. In fact, many people can see the next recession after the one that we are in now.

When you have an economic mess this bad, the only thing that Treasury and Fed can do is print as much money as they can, and then deal with the side effects later.

This is going to lead to heavy inflation, which is better than deflation, but then the inflation is going to have to be managed and the Fed will raise rates like they did in the early 80’s just to get inflation under control. This will be when the next recession emerges.

The new economy is not going to allow companies to get “too big”.

If they do become too big, they are going to be heavily regulated… and therefore there will be more challenges for them to become successful. The more success, the more regulated. All in all, this makes for a very different environment as an investor.

In conclusion, I feel that we are going to see the stock market have gains going forward, but there is going to be a another big pullback in a couple years when the Fed is forced to raise interest rates in order to curb inflation

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2 Responses to “Buy and Hold is Dead”

1. » Buy and Hold is Dead | The Network Newsletter - Stock Market… » Stock Market Investing Says:
   April 3rd, 2009 at 11:00 am

   [...] market news by admin « Futures Up Before Jobs Report; RIM Soars - Market Overview * US … S&P 500 [...]

2. Buy Only Stocks That Pay Dividends Says:
   March 1st, 2010 at 1:55 pm

   [...] Stock Picks Stimulus Plan Great investors like Warren Buffet, who are “buy and hold” investors, never turned their back to the market, an industry or a company! “Buy and Hold” was a phrase for promoting patience with an investment. [...]

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