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The Truth About Buy And Hold

Annuity EducationTo begin, none of this can be construed as investment advice as we never give any investment advice or stock recommendations.  What we strive to do is bring education and solid content to our readers.  This week we came across an incredible read from CNN Money called, “Why Buy and Hold Doesn’t Work Anymore“.  The title jumped out at us right away because that is usually the opposite of what CNN and many of their peers publish.  Not to mention, it is the mantra that has been preached to Americans for many decades.  From Warren Buffet to the rookie broker at Morgan Stanley, “Buy and Hold” is a catch phrase that anyone that has ever invested is familiar with.

This article carries quite a bit of influence due to the fact that Andrew Lo, famous economist and econ/finance professor at MIT, is the one giving the explanation.  Lo claims that the buy and hold method that has been preached for many years is less effective these days due to our development and adaptation.  In particular, how technology has altered the efficient market.  Many decades ago, actual “tickets” were printed, the stock order was written on them, they were placed, and that constituted the stock transaction.  Today, super computers and sophisticated trading software rule the world.  The human aspect of supply and demand to determine the true price of a stock has been thrown out the door.

Lo does point out that this doesn’t mean investors should fear or jump out of the volatile market altogether.  His recommendation is simply to do what we have done for hundreds of years…Adapt to it.

 

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