Buy And Hold Gets A Bad Rap

Filed in archive Investing on May 13, 2005

"Buy & Hold" (B & H) investing has been taken to the woodshed ever since the market peaked in 2000. I'm here to tell you the criticism is unjust.

First, most of the rabble you see trotted out on TV disparage B & H in one breath and then offer their "can't miss" stock picks in the next. Here's the problem, B & H was never, never, never, ever meant to be used in connection with individual stocks. It is meant to be used in conjunction with a properly allocated and diversified investment portfolio.

Second, these same gurus point up Nasdaq 5000+ as a reason why you just can't simply pursue a B & H strategy. They like to use the pejorative term "buy and mold." What these jackasses fail to tell you is that there is a third prong to B & H after you've allocated and diversified. You must rebalance. If you are doing so, you would have sold quite a bit of that Nasdaq 5000+ and reallocated the funds to something that wasn't performing quite as well - selling high and buying low. That's a neat concept huh?

The bottom line is, if pursued properly, B & H is an investment strategy that will never go out of fashion, despite what all the talking heads tell you to the contrary. One caveat, it takes discipline. If you have it great, if you don't, work with a professional who does.