Thursday, April 9, 2009


En*light"en\, v. t. [Pref. en- + lighten: cf. AS. inl[=i]htan. Cf. Enlight.] 2. To make clear to the intellect or conscience; to shed the light of truth and knowledge upon; to furnish with increase of knowledge; to instruct; as, to enlighten the mind or understanding. The conscience enlightened by the Word and Spirit of God. --Trench.
This article from Bob Brooks will start you on your path to enlightenment about buy and hold investing.

I like Dave Ramsey and what he is doing to enlighten people about personal finances. However, I have one contention with him - he is wrong about investing. But, he will just not listen to anyone about this error, this lie he believes. He could be encouraging people to find better money managers who will actively manage their investments, making a constant return year after year, regardless of the overall market cycles. By not doing this, he is costing people, and therefore the kingdom of God, Billions of dollars.
Shame on him for that.

Now, Bob's article will just start you down the path. For most people, it isn't until they have actually taken money, and had it actively managed, and see the return, and compare that to what they would have earned had they continued in the "buy and hold" strategy that they will become enlightened to the fact that "buy and hold" investing is not the best way.

So, let me point you down a couple paths toward that goal. First, find an active money manager who has a system that works year in and year out - such as Bob Brooks.
If you can't find one, try doing this:
Actively trade your own investment and see how you do with a simple system.
This is mostly for people who have the time and inclination to do some trading. But for those who don't, it shows a real life example of a system that works. This system is making this individual a 69% return during the first quarter of 2009. Which I might add- is one of the worst quarters for a buy and hold investor! Not only that, but He will NOT loose that 69% since he has stop losses in place. Its already guaranteed and in his hand. If you don't believe me, follow that blog until year end and see how he does. I guarantee you he will make his target profit of 50%.
And yes, his strategy works in bull markets too - although we may not see a secular bull market until 2030. How would you like your investments to be worth the same in 2030 as they are today? Don't think it can happen? Well, buy and hold investors have had just that happen.

The blog I mentioned isn't the only system that works better than "buy and hold". I myself have a simple system that works better. It is this: I keep my finger on the overall pulse of the general market (secular) cycles. When I see that we are about to go into a bear market, I put my investments in something steady. When I see that has bottomed out, I go back into more risky investments. Its very easy and it doubles the gains of a typical "buy and holder". You've no doubt heard these buy and holders quote a statistic about missing the five best days in the market as a reason to buy and hold. What they never quote is that if you had missed just the five worst days, your return would have been 10 times that of a person who had bought and hold over the same period (historically speaking).

No comments:

google search

click on this video for relevant video on my blog