Wall Street has been preaching the doctrine of Buy and Hold forever. The worst part about it is the small investor (and some big ones) actually believe it. Brokers and financial planners believe it, but when you show them they can get a better return by timing the market they just say, "It can't be done". They are either lazy or stupid.
Most brokers have not learned their trade - investing. Webster says that means putting money into something (stocks) for the purpose of obtaining an income or profit. When people look at their brokerage statements these days they must wonder where their broker went to school. Investors could have done better with a dartboard.
Brokers are not taught to make money. They are taught all the regulations that come out of Washington that must be followed so the brokerage company will not be sued. To my knowledge none of them are taught the basic fundamentals of increasing customers' wealth or protecting the customers' capital from loss.
Brokerage houses hire people to do reports about companies. They call them analysts, but today those jobs have deteriorated into snow jobs to get people to buy stock in a particular company. When you read the report you will find it very professionally done with pretty pictures and graphs and charts. Wow! I'll buy that. And a few months later you will wish you hadn't. When you have a loss the standard reply is, "Don't worry. You are in for the long haul. The market always comes back". In your lifetime? Today there are hundreds of stocks that have lost 50% to 90% of their value and there is absolutely no hope they will ever recover those losses. But?.you are in for the long haul. You now have the Buy and Hold philosophy.
Why do so many people cling to this doctrine?
You have a stock you bought for $40 per share that went up to some profitable number and now is down below $10/share. You're out 75% of your money. You are waiting for it to go back up so you can get out "even" and I will tell you "even" is a loser.
Many years ago I heard a story about how they used to catch monkeys in Africa. A hole was made just big enough for the monkey to get his outstretched hand in a hollowed out coconut shell. Fruit and sweets were placed inside. The monkey put his hand in and gripped the goodies, but could not remove his clinched fist. It refused to let go even when the hunter came to put him in a cage. All the monkey had to do was let go of the candy and he could have escaped.
Many investors are the same way about the stock they bought. They won't let go. The investor does not want to admit he was wrong. You are not wrong until you sell - just broke. Small losses will not hurt you, but holding on can put you in the poverty cage. Buy and Hold conventional wisdom will break you. Learn to let go of the losers quickly and you will preserve your capital.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
http://www.mutualfundmagic.com; 1-888-345-7870
rental limo Atlanta .. Lockport Chicago limo O’HareIn one of my previous articles (Investing in the stock... Read More
With all the bad news that has been dumped upon... Read More
I know there are a lot of you out there... Read More
In his wonderful book, 'Multiple Streams of Income', best selling... Read More
What is the Series 7 Exam? If you... Read More
"There is nothing more frightful than ignorance in action!" Johann... Read More
Invest in the stock market for the RIGHT reason, using... Read More
That sounds like good advice doesn't it? Don't lose all... Read More
Sometime around 1980, can't remember exactly, there was a flight... Read More
Is really not as important as to how you invest... Read More
Who are the successful investors?There are those who follow the... Read More
A recent cartoon in my daily newspaper showed two guys... Read More
Have you ever thought of investing? Do you have a... Read More
Picture one of those clubs where only the real heavyweights... Read More
Most people think the stock market is a zero sum... Read More
With over 6,000 mutual funds available, it may be tempting... Read More
Are you paying any attention to your retirement savings? Do... Read More
Everyone who invests in the stock market wants to be... Read More
Every broker and financial planner will tell you that you... Read More
When is a dividend not a dividend?The latest thing "conservative"... Read More
The stock market is very unstable at this time going... Read More
Now that you have some money burning a hole in... Read More
Today we are inundated with tons of information about the... Read More
Money management starts with protecting your capital, realizing profits and... Read More
As I have said many times before in this column... Read More
Bedford Park taxi to Midway ..Most stock market traders have a favorite technical indicator.The one... Read More
Trading is a fascinating activity.There are so many layers to... Read More
Do you own any mutual funds? In an IRA or... Read More
As one of my regular readers you know I have... Read More
In 1960 an engineer working for a watch company in... Read More
With the internet such a huge part of our daily... Read More
How often have you come across an advertisement or e-mail... Read More
Duck! No I don't mean a quack, quack. I meant... Read More
What a great statement!I just heard someone use it in... Read More
Stock investment advice is easy to find. Do you get... Read More
The following are a list of nine things you want... Read More
It is commonly reported that the stock market averages about... Read More
What are you thinking when it comes to your no... Read More
Every day I see in the financial section of newspapers... Read More
One of the basic laws of physics states that a... Read More
When is a dividend not a dividend?The latest thing "conservative"... Read More
It's about time someone spoke the truth concerning outsourcing. The... Read More
It looks like the market is ready to start up... Read More
Exchange Traded Funds (ETFs) are a group of passive index... Read More
To become a successful trader you must have some kind... Read More
In 1960 an engineer working for a watch company in... Read More
For some "long term" would mean holding a stock position... Read More
A few years back ? it seems like an eternity... Read More
Mutual funds are doing more and more to discourage investors... Read More
Now that you have some money burning a hole in... Read More
Stocks & Mutual Fund |