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Buy And Hold Is Not Buy And Forget

 September 20, 2011 11:12 AM
 


We have all heard it. Mainstream media pundits talking about 'the lost decade' and that 'buy-and-hold as a strategy is dead and gone, if ever it was a viable strategy.' Sorry folks, but I am not buying or holding their position on buy-and-hold. Buy-and-hold is neither dead, gone or even sick, but I will concede - it is misunderstood.

Walt Woerheide, a professor of investments at American College and co-author of the financial professionals' textbook "Fundamentals of Investments for Financial Planning," shared his views on buy-and-hold in an interview on BankRate.com. Here are some of his notable comments when asked 'is buy-and-hold dead?':
No, absolutely not, and it never will be. It comes back to the fact that anybody who thinks they are going to outguess the market is going to be wrong as often as they are right.

You had to be correct about 80 percent of the time to beat a buy-and-hold strategy.

The biggest danger in trying to guess the market is being out when the market makes a big jump.

Every time you are jumping in and out, you're paying commissions.
However, buy-and-hold is not buy-and-forget. We must constantly monitor our holdings to ensure there is no deterioration in the underlying fundamentals of the stocks we hold. This concept was reinforced recently when I came across a couple of articles I wrote back in August 2008.

The first article listed my top 5 performing stocks for 2008 through July 31st.

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