Since I can remember, and thats a long time ago, the Wall Street brokerage companies, mavens and mutual fund managers have been exhorting the mantra of Buy and Hold for all your investments. There have been erudite studies published that this is the only way to go. Does it really work or has the little investor been lied to all these years. Of course, you know the answer if you have owned any stocks or funds for the past 3 years. From my analysis the latter is true. The big boys buy and sell all the time. If you look at the executives of companies it seems they all know when to sell right at the top before their own company stocks decline. This is easily proven, as the SEC requires all listed-company executives must report both buy and sell transactions. It is not the same as an insider sale, but it might as well be, as those guys know if the company is making or losing money. The past couple of years the preponderance of stock sales has been on the sell side. These sales are easily understandable, but why do brokerage companies want you to buy and hold, especially hold? There are 2 reasons. First, they want to move inventory out of their ownership to you. That transfers the risk and now they have your money. Even more important, when you HOLD there is less stock for sale, less float (fewer tradable issues), and that means it takes less money to manipulate that particular issue. Also fund managers dont want you to sell their fund once you have bought it because they get paid on the amount of money in the fund not on the performance of the fund. This is a great rip off of the investor causing him to hold an asset that is worth less and less. Many of the large fund managers are paid 7 figure salaries. How can a so-called professional manager receive more than a million dollars to lose money for his clients? Yet, they do! Buy and hold is a farce perpetrated on the small investor. There are 78 million mutual fund owners and 80% of them have less than $50,000 in their accounts. No one ever says SELL. Here is one more fact you will not read in the financial media. Mutual funds only work during bull markets. The bull market that started in 1974 (some say 1982) definitely ended in 2000. The longer a bull market is in effect the longer is the bear market that follows and is usually about the same length of time. Scary, huh?! But true. Now what? Buy and hold? The facts speak for themselves. If you are not a trader the safest place for your money during the next several years is in U.S. government bonds. They wont pay much, but you wont lose your money as this bear eats away at the stock market. |
