Is Buy & Hold The Best Strategy?

If it works for Warren Buffet, it must work for you, right!? Hold, not so fast. Is Buy and Hold indeed the best strategy to generational wealth? Maybe not.

Why? It really depends on which stocks you pick. Here I show two stocks: SWN and AMZN, which both have been trading for over 20 years now. If you’d bought SWN ten years ago (July 2008) you’d have lost 90%. If you’d bough AMZN the exact same date you’d have gained over 1600%. Just let that sink in: $1000 put into SWN in July 2008 is now worth $100, while $1000 put in AMZN is now worth over $16,000.

If you’d bought SWN 20 years ago (July 1998) you’d be up just a little over 400%. What a difference 10 years can make, right?! But wait, there’s more. If you’d bought AMZN back then you’d be up almost 11000% (!!!!). Now let that sink in for a moment.

SWN vs AMZN monthly

Thus, buy and hold is really not the ultimate strategy as one has to pick companies very carefully. I therefore call it “buy hold and hope” instead. And nobody gets rich from “hoping”.

Also, please remember what happened to SWN’s stock price can happen to ANY stock. Yes, also to AMZN and NFLX, and AAPL, etc as nothing is immune to the test of time. For us mortals it may simple be best to stick to riding trends and when the trend ends, sell.  This requires you to have an exit strategy in place. And if you don’t have an exit strategy your left with “hoping”. Please contact me or sign up for my trading course to learn all about trading the trends, knowing when to enter and when to exit. Because knowing when to exit is THE most important aspect of any trading strategy; from short-term to long-term.

Arnout, Ph.D.

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Founder and President Intelligent Investing, LLC

Vice President NorthPost Partners, LP

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