For decades, retail investors have been brainwashed into thinking the only way to make money in the stock market was to utilize a "buy and hold" strategy. The pitch was that if you just keep your money in the market when the going gets rough, such as in bear markets, the substantial upside in the good years will more than compensate for the down years, thereby leaving you with a solid annualized gain over long-term. In fairness, that was true for the approximately 20 years leading up to the new millennium. However, in case you been sleeping in a cave in recent years, times have changed.
Our firm opinion is that the geopolitical landscape of the world has changed so much in recent years that we, our children, and our grandchildren will be facing a brave new world with regard to investing in the stock market. Yet, the average financial advisor working at any of the old-line brokerage firms will still insist that the "buy-and-hold" model is not dead, and is the only proper way to invest in the market.
I will take it a step further by saying even financial advisors who actually believe the "buy-and-hold" model will no longer be very effective in the future (at least for the next several decades), will still not tell you otherwise. Why? Because the institutional investors (banks, mutual funds, hedge funds, pension funds, etc.) need to continue perpetuating the myth in order to help promote liquidity in the markets, and in hopes of preventing future market collapses due to panic-fueled selling by the masses when they eventually figure out the actual state of affairs. [continue reading original post]