Is Buy-and-Hold investing strategy dead?
In this issue:
» Governments should leave businesses alone
» India Inc far too pessimistic, feels ITC head
» The biggest problem with the US
» Is the worst of the financial crisis yet to come?
» ...and more!
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Does the above conclusion hold any validity? We certainly don't think so. The opponents of buy and hold strategy seem to be taking too generalised a view of things. They should know that not all stocks are candidates for buy and hold investing. The ones passing the test of sound business model, strong financials and attractive valuations are the only ones that qualify as buy and hold candidates. And such stocks can be bought at all times, irrespective of the kind of environment. Secondly, volatility in share prices should not be confused with volatility in underlying business. A lot of times there seems to be a great degree of disconnect between the two. Like for example share prices can be volatile even though the profits of the underlying business are growing year after year. Thus, classifying such a stock as volatile completely misses the point. To conclude, we believe that in a sea of irrationality that is finance, buy and hold strategy of investing in good business models at sound valuations and staying put as long as the fundamentals justify the same is amongst the most rational strategies out there. Terming it as useless based on generalised assumptions and few years of underperformance is akin to doing great disservice to one's investment returns over the long term.
Do you think buy and hold form of investing is dead or is very much alive? Share your comments with us or post your views on our Facebook page / Google+ page.
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Source: LiveMint |
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The current economic and financial crisis that the US is facing is no random accident. The root problem is the country is being governed by a wrong set of people. The sad truth is that major institutions of the US are being driven by people who could be characterised as sociopaths. The rot has seeped into the system very deeply. Only some big disasters would be able to topple the existing order. Not only the US, but the entire world has to be prepared for some really big upheavals.
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A big reason for the surge in the industry is the changed focus of most hedge funds. They are now concentrating more on the so-called value strategies. These try to profit more from pricing anomalies in the stock markets rather than on the direction of the markets. They seem to have finally realized that calling the bottom or predicting broader markets cannot be the strategy for making money in the long run.
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04:57 | Today's Investing mantra |
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4 Responses to "Is Buy-and-Hold investing strategy dead?"
Manish
Apr 21, 2012I just share some pesonal facts -
As employee of Lupin received 100 shares after applying through company loan in 1994.Cost 11800.10 rs.n 118 rs.premium.
Received bonus 2004 n then recently split made it 1000 shares.CMP 550.
Vinod Sajnani
Apr 20, 2012On the lighter side, if Buy-and-Hold investing strategy dies, many of the analyst will lose jobs and and research agencies will close down. On the serious note, this strategy is essential to map the company's operations and performance with the investment fundamentals. It not always true that the stock that give better returns, is result of fundamentally strong company. Investing strategy can only differentiate the good bad and ugly for the interest of investors.
Vinod
Apr 20, 2012Yes, as on date the "Is Buy-and-Hold investing strategy dead?".... rather completely DEAD. see how the story of Gas find in KG-6 Basin shot up the Reliance Industries Ltd., stock many folds to achieve a target of 3000+, but after 1 to 1 one bonus even the half of it has eroded badly in just 2 years. The stock which was around 1100 after the bonus is now around 730 almost a one third loss and the results today show a further fall in the coming days, may be RIL is fairly valued at around 500 before the end of May. So far RIL has been gaining only because of the Govt. giving out huge sums of money running into thousand of crores as subsidy to OMCs' (oil Marketing companies) for the short fall in their realizations. But how long will the Govt. keep on playing with the Tax payers Money. We need to shut down the loss making National Carrier AIR INDIA, in lieu of funding there losses year after year. US was much wiser when they closed down PANAM. We must follow them right now, instead of bailing out AIR INDIA. Likely, the re capitalization of Banks is un warranted... why should the Tax payers bear the losses made by the Banks because of there lazy and High headed staff. All nationalized bank in India are highly over staffed and also inefficient staff which need be given voluntary retirement with immediate effect. The figures of IPP are all manipulated by the Govt. to give a wrong impression overseas to get FII make investment or FDI coming into India. All this is hot money and can ruin our economy in the long run. The major boost is required to be given to our exports to make the country surplus in Forex, as even on to date our imports are some 30% more than our exports, leaving a big gap in our forex reserves, which is bring covered by FII, FDI & NRI remittances. Govt must wake up in time, before we meet the fate of Greece, Spain or Portugal
Vijay
Apr 25, 2012Buy and hold strategy certainly can't be dead. However, given the current volatile nature of the market, one gets tempted to set aside a portion of the investment money to buy into stocks that have temporary declines, make a quick 20-30% return within a span of a quarter or half year, and plough the profits back into Value stocks.