- Buy in May and Stay Leveraged Long
- Buy the Rumor, Buy the News
- Buy the Dip, Buy the Rip
- Be Greedy When Others Are Greedy
- Bulls Make Money, Bullish Pigs Make More Money
- Rule No. 1: Never Go Short. Rule No. 2: Never Forget Rule No. 1
- Buy Low, Buy High
- The Uptrend is Your BFF
- Always Go Long a Dull Market
- There’s Always a Bull Market Everywhere
- 3 Steps and Soar
- Always Catch a Falling Knife
- Stairs Up, Elevator Up
- Stocks Climb a Wall of Serenity
- Buy When There’s Anything on the Street
- Always Reach for Yield
- Buy Rosh Hashanah, Buy Yom Kippur
- Anyone Who Went Broke Took Profits
- This Will End Well
- Everyone Has a Plan Until They Get Rich in Bitcoin
- The Easy Money Has Yet to Be Made
- The Calm Before the Melt-Up
Archives of “buy and hold” tag
rssNot A One Way Train
Words of wisdom from Dave Landry’s new book, The Layman’s Guide To Trading Stocks:
Wall Street Myth 1: The market always goes up longer term
It seems to be universally preached that the market “always goes up longer term.” And, all you have to do is buy a diversified mutual fund or index fund and wait. The problem is that markets do not always go up longer term. Well, I suppose it all depends on what you mean by longer term.
Suppose you bought stocks in 1929 at the market peak. Provided you could have held through a 90% loss, it would then have taken you a quarter of a century just to get back to breakeven.
Let’s say you bought stocks in the mid-1960’s. Your return would have been almost zero until the market finally broke out in 1983, which was 17 years later.
When I began this chapter, I was concerned that there might be a “that was then, this is now” mentality. After all, the benchmark S&P 500 wasn’t far below breakeven from the 2000 peak. I thought I was going to have to make a strong case for not buying and holding. Unfortunately for the buy and hold crowd, the market made my case for me. The bear market that began in late 2007 would turn out to be the worst since 1929. By March 2009, the S&P was at 13-year lows. From these lows, the market will have to rally over 200 percent just to get to breakeven.
At more than one cocktail party, I have had people laugh in my face when I tell them that the market can go 25 years or more without going up. This has made for some heated discussions and awkward social situations. I have since learned from Dale Carnegie and my wife Marcy to just nod my head and enjoy my drink. Do not take my word for it, just look at the charts and grab me a Black and Tan while you are at it!
Effectiveness Is the Measure of Truth
In trading as in life, effectiveness has to be the measure of truth. If something doesn’t work, there is no point in continuing to do it. Misperceptions, false unconscious or conscious beliefs, and unhelpful behaviors can contaminate and desecrate your most sought after results.
Imagine the frustration of a trader who perceives that a market is changing direction when in fact it is persisting in its original thrust. Or consider, for further example, an investor who bought into the belief that buy and hold is a valid investment strategy. That investor had to have experienced devastating losses over the past year. Or ponder the trader who repeatedly fails to utilize stop losses and experiences numerous outsize losses because he won’t accept a loss. (more…)
Effectiveness Is the Measure of Truth
In trading as in life, effectiveness has to be the measure of truth. If something doesn’t work, there is no point in continuing to do it. Misperceptions, false unconscious or conscious beliefs, and unhelpful behaviors can contaminate and desecrate your most sought after results.
Imagine the frustration of a trader who perceives that a market is changing direction when in fact it is persisting in its original thrust. Or consider, for further example, an investor who bought into the belief that buy and hold is a valid investment strategy. That investor had to have experienced devastating losses over the past year. Or ponder the trader who repeatedly fails to utilize stop losses and experiences numerous outsize losses because he won’t accept a loss.
When you choose effectiveness as your measure of truth, you can learn from your mistakes. You can make plans, take action, receive feedback, and assess the results. You can revise your plans, take new actions, receive new feedback, on and on, until you find a viable strategy that will work most of the time.
When you fear loss, when greed overcomes you, when you get reckless, or when you hesitate, you become grossly ineffective. When you’re confused or ambivalent yet think you need to take action, you do yourself no good. In each case you need to sort through your thoughts, develop a clear focus, search for the high probabilities, and take prompt and calm action. (more…)