Does Buy And Hold Investing Still Work?

First let’s identify what buy and hold investors are.  They are individuals who are content purchasing quality shares and holding them for many, many years.  They are looking to build a retirement account so they really have no price target or exit timeframe.

While I believe that this has been a very viable way of creating retirement wealth in the past I believe that there are factors that have come together to make a buy and hold strategy somewhat of a dead strategy.

Buy and Hold Investing Results

If you had been invested in the US stock market in 1997 you would have been unpleasantly surprised when in 2002 you realized that you had given back all of your 5 years of profits.  If you decided to stay invested from that time it would have taken you four years or the end of 2006 to get back to that previous market high price.

Now you are relieved that having invested in 1997 by the year almost 9 years later you are back to where you had been before.  Then in October of 2007 the market began a drop that ended two years later and that market drop wiped out the gains going back almost 12 years.  The professional investors actually call that period the lost investing decade.

That’s right!  Having recovered your entire invested funds and profits back you managed to give it all back again and then some.  Having stayed invested you should now be sitting quite pretty.  However remember that this has already been almost a 20-year cycle of profits and losses.

Is There a Better Alternative?

So what would be a better alternative than seeing my retirement account experience these fluctuations much like a yo-yo?  Realize that for retirement purposes the goal is the trade the market in the direction it has the highest probability of going.  And that direction may not always be to the upside.

When we understand how the stock works it is amazing to see how there is a certain rhythm to the market.  It truly is exciting to build a retirement account with the least amount of capital and least amount of effort and know that being invested in the market does not have to be a process of generating profits over a few years to only give it all back and then wait until we recapture those profits.

For many individuals a stock market retirement portfolio will play a huge role in the ability to make sure that we can maintain our current lifestyle and in the unlikely event we experience any type of emergencies either because of health or family issues that we have the means to bounce back and make life the very enjoyable and amazing experience it is.