In the ’90s, buy-and-hold investing was a no-brainer—every market was going up. But that’s not the case today. Warren Mackenzie, president of Toronto’s Weigh House Investor Services and author of New Rules for Retirement, says buy-and-hold is “not a valid thing at all.” He points to Japan, where the Nikkei index hit about 40,000 points in the ’90s; today’s it’s 9,500. “Imagine being a retiree in Japan and buying and holding,” he says.
These days investors need to be hands on and buying and selling with more frequency. Ken Solow, author of Buy and Hold is Dead (Again), says people need to follow three steps to invest in today’s market: form an opinion on whether the market is expanding or contracting, look at whether the market is overextended and pay attention to metrics such as price-earnings, price-to-sales and dividend yields to find cheap markets and companies. Put it all together to find out where your money should go.
(Research, editorial and spiritual support provided by Bryan Borzykowski)