Wall Street’s False Truism: Is Buy and Hold Always Better?

I’d like to talk to you about Wall Street false truisms regarding buy and hold investing. “Buy and hold has always been better” is a very institutional mindset. It works really well for endowments, foundations, and institutions that are generally going to have more money coming in to cover their bills if the market should decline.

However, individuals don’t have that opportunity. If there’s a wedding to be paid for, a house to be bought, or retirement to be taken, you don’t have a new flow of cash coming in from a donor. If the market’s declined, you’re going to have to realize that loss. Valuation really does matter when looking at whether an asset is cheap or expensive. So the buy and hold strategy doesn’t always work.

Emotional human beings tend to dump their portfolios when markets go down and add to them when they go up instead of looking at whether assets are cheap or expensive. You wouldn’t walk into the store if things were 100% marked up. You shouldn’t walk into Wall Street with a 100% markup either.

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