More "Goodbye"s to Buy-and-Hold

by: Roger Nusbaum

My post yesterday Say Goodbye to Buy-and-Hold drew a couple of good comments and a mention elsewhere in the blogosphere, writes Roger Nusbaum. I think a follow up is appropriate.

Kevin Stecyk left a thoughtful comment about the downside of dividend payers. Kevin pointed out that dividend payers are often interest sensitive and cited Bank of America as an example of a stock with a nice yield that is getting hit in this last rate spike.

Kevin says not to blindly choose dividend paying stocks. I agree, and I hope no one read my comments as implying any old dividend payer would do. As for financials, I think long time readers know my position on the sector but if not; most clients own one domestic bank (Bank of America) and four or five high yielding foreign banks. A few clients a second domestic name. This has been my position for quite a while because there has been visibility for the next big move in rates to be up, I just don't know exactly when that will happen. Maybe it is starting now.

Bernie left a skeptical comment about the motive behind suggesting more trading. This is always a good question to ask. I certainly don't have any unusual insight to this point but I like the question.

The Online Trading Blog noted that this may not be the best time for shorter term stock picking. That blog also links the Wealthcast Blog written by Jack Rothstein. I'm not sure but I think Jack does some writing for Jack feels that this is a stock pickers market. As a matter of philosophy I don't believe in that notion.

The data on this can be mined to say anything you want, but there are countless studies that show getting things like sector, country, style and cap size correct accounts for more of an investors eventual return than what stocks get selected. For example of you picked an oil stock to buy one year ago chances are you are up. If you picked a domestic bank stock a year ago chances are you are flat or down a little.

I am top down, I guess by looking at Jack's site he is bottom up. I hope you will take a little from me, a little from him and a little from some other people and draw your own conclusion.

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