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STP-083 ______________________ ________________ _March 11, 2010
| Markets | Business | Economics | Technology |
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>> | Answer to MP 07 | <<
Buy, Hold, Sell, or Trade ?
Today, we are continuing the thread started a few days ago about this possibly being an “average” ( 2 — 3 year ) bull market. For this discussion then, let’s assume it is the beginning of the 4th inning of this game and we have another 2-year stretch of a bull market ahead. We further assume the next two years will not be anywhere nearly as robust as the past year in terms of market gains.
Providing a specific invest strategy for everyone is foolish and we will not do that here. We all have different financial situations, different goals, and different risk tolerance levels. What we will do is make a list of a few simple rules that fall into the common sense category; these are rules you have read about often but probably keep forgetting in the hectic course of daily life. To repeat, these rules (recommendations) assume the current bull market has another two years or so to run.
1. Diversify Your Assets
This is the cardinal rule of investing. Do not forget this one!
We recommend always holding some cash reserves. Then diversify among assets such as good quality stocks (or mutual funds or ETFs), some bonds (corporates or Treasuries), and some real estate (your own home if possible). Some gold assets (mutual funds or ETFs) might be included for some people.
2. Do Not Trade Frequently
Unless you are a professional trader, do not trade frequently. Many studies have shown that trading frequently is a losing proposition. The usual statistic is that over 90% of traders lose money. Who needs that headache? If you have an itch for trading “action”, take a limited amount of money and go to Las Vegas.
3. Do Not Succumb to All the Trading Ads
There are now many ads out there screaming about how easy it is make quick profits by trading foreign exchange currencies or commodity futures. Don’t be lured by those ads. That, dear reader, is really a losing game. Trust me on this, I’ve been there.
4. Buy and Hold is Best for Today
We believe a “Buy Good Quality and Hold It” strategy is a good one for today’s environment. With so much investment and financial news streaming into our eyeballs every day, there’s a strong temptation to sell one asset and switch into another because it looks more attractive. Why make those constant buy and sell decisions and incur added fees and possibly added stress. We go along with Warren Buffet’s long term strategy: buy a quality asset, with a proven stream of recurring cash flow, at an attractive price, and hold it forever! Well, forever is a very long time. For some, a decade or two might be appropriate. For this discussion, based on our initial assumption, let’s say for the next two years.
5. Employ a Professional Advisor
Many people simply do not have the time, the knowledge, or the inclination to make investment decisions in today’s complex world. Why not relieve yourself of this burden, spend some money, and employ a professional? We recommend consulting with honest financial planners or investment advisors with a proven track record. Yes, this can be daunting and difficult.
Here are some suggestions:
Try to get a recommendation from a friend or relative; Consult with at least three different candidates to get an idea of how they operate; don’t be at all shy or intimidated by anyone. Ask tough questions. It’s your money and you want simple, honest answers.
Assuming at least two years of a modest upward trend in stocks, a sound and prudent strategy today is to BUY (good quality stocks, mutual funds or ETFs) and HOLD them for that period.
DISCLAIMER:
StansTake.com is not a registered investment advisor. Nothing contained in any of this material should be construed as a recommendation to buy or sell securities.
Opinions or suggestions are given with the understanding that readers acting on information herein assume all risks involved.
Our sources of information are believed to be reliable, but they are not guaranteed to be without error.
In addition, we highly recommend that readers do their own investment research or seek advice from registered investment advisors on subjects commented on above.
