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Varchild2008 (85.21)

Don't Read the "BUY" and "HOLD" Article Deluge

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22

June 22, 2009 – Comments (16) | RELATED TICKERS: CAT , ATVI , DPS

Some advice here!  DO NOT READ the Buy and Hold Article Deluge.  I haven't read a single one yet.  They ain't worth your time... Cause sitting around thinking about "Buy" and "Hold" strategy and whether it works makes you question whether or not you'll ever bother to give it a try.

You don't buy and hold for 6 months... Don't get the results you want and immediately dive into Short Trading Strategies... Then start whining about the Commission Fees, the Hits only to run into huge Misses....The tortorous battle with your Stock Broker to get PowerTrading status so you can get Less Fees.....The Relentless Extra Research you have to do cause you are playing with far more stocks in far more sectors than you are used to....

*ENOUGH*!!!!!!!!!!!!!!!!!!!!!!

Cause it frankly DOESN'T MATTER if *Buy* and *Hold* doesn't work.....or does work....

As long as you remember the simple golden rules of investing you have nothing to worry about!

Rule #1)  Diversify your portfolio of 5 or so stocks in at least 3 sectors....

Rule #2)  Make the majority Dividend Paying Stocks that boost your Cash Flow during Down Markets and Pullbacks and Dips.

Rule #3)  Every Stock should be a Company you are Familiar with, Love, buy their services/products, and can litterally visit their locations on your Days Off from work.

Rule #4)  Mix some Small Caps with Large Caps....

You got those 4 rules down.. Then you got nothing to worry about!  Nothing!

Cause a FIST FULL of Dividend Cash will generally net you far more savings than putting your money in your Savings Account or in a CD or in a BOND or in a INDEX fund...Or Ad Nauseum.


How more complicated is it than to just sit back collecting 43 or whatever cents a share dividend on your (WHR) stock for example?  (I own 56 shares of WHR right now).

How more complicated does investing have to be beyond building share counts in companys whose products you love and buy and know many others around you that love and buy them?

I mean come on??? 

Buy and hold doesn't work???  That would be like telling everyone that:

A)  Activision Blizzard (ATVI)   has PEAKED  at $13.00 and will never trade higher...Cause Buy and Hold doesn't work...

B)  Dr. Pepper Snapple Group (DPS)'s  IPO price of $26.50 is the best it will ever manage to do....if you buy and hold for 20 years.

C)  Sparton Corp (SPA) will never get itself out of debt and back to profitability no matter what they do cause Buy and Hold doesn't work.


How many thought (COT) would absolutely NEVER get out of Penny Stock Status?  I bet tons! Myself included! 

How many predicted the American Axle (AXL) share price surge?

How many thought FORD would trade at $6.00+ back when it was at $1.01?

How many here can tell me what the share price of (CAT) Caterpillar will be on October 11th, 2021?

For those that believe BUY and HOLD doesn't work.... Answer me... What will be CAT's share price in October 11th, of 2021?   Take a gander!

DISCLOSURE:  I own shares of DPS, ATVI, and WHR.

16 Comments – Post Your Own

#1) On June 22, 2009 at 8:27 PM, UKIAHED (35.19) wrote:

Nice!  Rec from me

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#2) On June 22, 2009 at 9:31 PM, QwertyHero (< 20) wrote:

I dont get it...

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#3) On June 22, 2009 at 10:05 PM, Varchild2008 (85.21) wrote:

You don't get what?  My CAT Comment?  That comment was genius actually...

The very fact that an Anti-Buy and Hold analyst can't possibly tell you with any confidence what (CAT)'s share price will be on October 11th, 2021....  Tells you that they CAN NOT with any confidence tell you that Buying CAT and holding all the way to October 11th, 2021 (which is approx. the date you sell off your shares) will be a GOOD or BAD investment.

No Anti-Buy and HOLD analyst can have any confidence that Buy and Hold doesn't work in a 20 to 30 year time frame.

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#4) On June 22, 2009 at 10:06 PM, Varchild2008 (85.21) wrote:

PICK any STOCK in the STOCK MARKET....

And I'll ask the same question over and over again...

What's its Share Price 20 years from now???  30 years from now??

Don't know?  Then you don't know if Buy and Hold will work for that given stock.

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#5) On June 22, 2009 at 10:34 PM, soycapital (< 20) wrote:

Good post and advice! I'm so sick of all the "buy and hold hoopla" also. What a waste of time! If it's a good company with good dividend and a secure future, hold it. If not dump it and find another stock and buy and hold it. What's the argument?

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#6) On June 23, 2009 at 12:56 AM, walt373 (99.79) wrote:

The buy and hold argument is irrelevant because valuation is actually the main topic. Buying undervalued securites and holding works. Buying any time and holding - maybe not.

If a stock become overvalued, either because of a price runup or declining fundamentals, it might make sense to sell it. There is a simple equation to determine whether to sell or hold:

Stock price - commissions - capital gains taxes > intrinsic value ? if yes then sell. otherwise, hold. You can also include a margin of safety to the left side.

The length of time that you hold a stock is not one of the basic variables. However, time does play a role, in that prices tend to gravitate toward intrinsic value over time. Also, as capital gains accumulate over many years, selling makes less sense (because of the taxes you would have to pay). That is the rationale for buying and holding.

If the stock is a bad investment when you buy it, holding it will not magically turn it into a good investment.

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#7) On June 23, 2009 at 11:19 AM, HooDaHeckNose (95.78) wrote:

"If the stock is a bad investment when you buy it, holding it will not magically turn it into a good investment."

ABSOLUTELY! There it is in a nurshell. Its not about buy and hold versus swing trading/day trading/market timing. Its about whether an individual investment was made at an advantageous price.

(I wish we could rec comments)

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#8) On June 23, 2009 at 3:34 PM, alexxlea (66.68) wrote:

Buy and baghold and watch actively managed money run past you.

And no, I don't mean idiots at mutual funds, I mean people whose job it is to make money off of other idiots. Making money on a consistent basis has become quite easy with some of the new things around, to be honest. And unless the amount of gain you would get from managing your capital more actively does not warrant extra time put in... well... I would strongly advise you reconsider not watching your stocks in this market environment. You are in for another slaughtering this summer and next year.

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#9) On June 23, 2009 at 3:43 PM, catoismymotor (51.71) wrote:

+ 1

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#10) On June 23, 2009 at 3:57 PM, lemoneater (81.74) wrote:

Very practical investing rules. The only one I regularly break is number #3 since I like some foreign stocks for diversification. I have noticed that when the U.S. has a down day often foreign stocks go down the day after whether or not they deserve to dive so that I can buy them cheaper. I have seen it happen with Asia and Israel. Perhaps it is a coincidence but it has worked  for me. 

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#11) On June 23, 2009 at 4:00 PM, ETMatyahoo (43.59) wrote:

I'll not read YOUR comments past the first line then.

 

How do I thumbs down a comment?

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#12) On June 23, 2009 at 4:19 PM, jmt587 (99.88) wrote:

If you're interested, I can sum up the buy and hold article hoopla for you:

MF is now contending that for some investors, B&H doesn't work, because of their temperment, timeframe, etc.  For those, they have a new wonderful service they'd like to sell you called MFPro, that will fit your hyper-active trading style, and allow you to make money in any market.

Re: alexxlea up in # 8, the comment is laughable.  If making money on a consistent basis off of the new things around (paraphrasing) has become quite easy, then why isn't everyone doing it?  Obviously it isn't easy, and, further, it's obvious to me that, like WB says, if you consider the market as comprising two groups, long term buy and hold investors, and traders, they each have their share of the market, but the traders, as a group, will always underperform the buy and hold investors, as a group, because of their frictional transaction costs, going in and out of trades.  Sure, some traders will outperform the market, but as a group, they'll underperform by more than the buy and hold group will.

My takeaway?  If you think you're smarter than the average bear (ooh, accidental double meaning, love those!), partition part of your account for trading, and measure how it performs compared to your core buy and hold portion.  If you don't measure the difference, then you won't really know if you are better.

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#13) On June 23, 2009 at 4:38 PM, masterN17 (< 20) wrote:

Rec #22.

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#14) On June 23, 2009 at 4:49 PM, cmoney85 (20.53) wrote:

Here you have it my my friends, the number 1 investing advice.  Buy low and sell high!  It doesn't matter if that takes place over 1 day or 50 years.  If you know for sure tomorrow your stock will be worth less than it is today, you should sell today.  If you don't think it will be, then should keep it until you do think it will be.  At no time should you just buy a stock, and not research it/watch it and just expect it to be worth more in 50 years than it is today.  
I was taught in school, that if you invest in the market, over a 10 year period you will have roughly a 7% gain.  I think this here lies the problem, people just throw money into the market at anytime, and expect a return of 7%+ after 10 years, with no research on their investment, or if the market is over priced at the time of their investment.  You may have been able to pull that off in the 80s, but not any more.
I read a blog here on caps, about buying stocks during recessions or market down turns, selling after a rebound, and then holding money in bonds etc.. until the next crash.  I have actually been doing this by accident (I've had to sell stocks for other investments, and it just so happened to be at peak times) and have had a very successful investing carrier.

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#15) On June 23, 2009 at 5:06 PM, MyDonkey (< 20) wrote:

"What will be CAT's share price in October 11th, of 2021?"

CAT will likely be bankrupt by then, and will emerge after a bailout as a new "leaner and meaner" company named DOG which won't fare any better.

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#16) On June 23, 2009 at 5:31 PM, Varchild2008 (85.21) wrote:

DOG backwards = GOD = First Stock that always trades up!

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