This week, I continue my efforts to keep you informed regarding the sometimes misleading arguments used by Wall Street in support of buy-and-hold investment plans. While these studies and publications are often based on accurate market data, they are skewed in such a way as to reach a deceptive conclusion. I would bet that most investors have seen buy-and-hold promotions that advise against "timing" the market since you might miss the best 10, 20, etc. best days in the market. What these promotions don't tell you is what happens if you miss the worst days in the market. I'll fill you in on the missing information, and you will be surprised at what it reveals.
Then, I'll take on the tired old buy-and-hold argument that you shouldn't move to cash in bear markets because the gains of a new bull market are concentrated in the first few months. Thus, if you are in cash, you'll likely miss out on these early gains. What these shameless promotions conveniently leave out is that this is true only if you are at or near the actual market bottom, which is very hard to predict. I'll balance out this argument by showing what losses you might miss out on if you move to cash, and how missing these losses may more than compensate for any gains lost in a renewed bull market.
Unfortunately, many investors swallow buy-and-hold arguments hook, line and sinker without asking critical questions. It is my hope that resources like this week's E-Letter will empower you to resist these purposely misleading Wall Street promotions. I also encourage you to forward this week's E-Letter to anyone you feel may benefit from this knowledge....