I have written about this topic on several occasions previously on the Golden Valley Minnesota Patch web site. Below is my latest take on the same topic.
Buy-and-Hold investing has been preached to Minnesota company 401(k) plan participants since the beginning of their working careers. Buy-and-Hold investing is just another name for “set-it-and-forget-it” investing.
Can you name me one other investment in your working lifetime that you have been able to “set-and-forget?”
Has the price of your house changed over the last few years? Has the price of gasoline and food risen over the last few years? What has happened to the price of your health insurance recently? Have you sent any kids off to college in the last few years?
Face it; there are no other economic elements in your life that you can Buy-and-Hold. To think for one minute that stock market investing is any different is crazy.
Why in the world would any rational and logical person continue to believe that not changing your company retirement plan account investment management strategy would lead to a successful outcome?
The human emotions of fear and greed sometimes upset the proper balance between supply and demand. When that happens, the price of any good or service moves sharply up or down for reasons that we only find out about later on.
The stock market has been in a mild uptrend for over four years now. It has been exciting to see the value of your company retirement plan accounts slowly rise during that time period.
But you don’t want to be fully invested when that long, slow uptrend stops. At some point in time, there will be more sellers of stocks than buyers of stocks. You don’t want to remain 100% invested in your company retirement plan account when that shift occurs.
Buy-and-Hold doesn’t work anymore. Owning any financial asset now carries much more risk than anytime in economic history. The volatility of the world’s economies and stock markets is too significant in this day and age.
Owning any financial asset for a long period of time can no longer assure you of the same level of annual investment return that you may be received earlier in your lifetime.
Part of your long-term company retirement plan investment game plan has to include a risk-management strategy. You can’t Buy-and-Hold anything in your financial life.
Ric Lager
Lager & Company, Inc.
