Is Buy and Hold Dead As An Investment Strategy?

by KYW's Salil Gutt

One of the central tenets of investing is being seriously questioned. Is it time to bury the concept of buy and hold investing?

Buy and hold has been portayed as the holy grail for long term investors. This is being tested today as never before because the market today is lower than it was at the start of this century.  In the past eight years we have had the volatility only a trader would love.

The logic for buy and hold is sound. Markets move in cycles and no one is so prescient as to time the market perfectly.  It's only cocktail party chatter when you hear that everybody, but you, got out of the market at the top and bought at the bottom. Investors who time the market get it wrong over and over again.

Research has shown that the average equity fund investor earned 4.5% a year over the past 20 years compared to 11.8% for the S&P 500. The reason. Investors sell low and buy high.

The bottom line. If you are in it for the long term then buy and hold is still a viable investment strategy.