Investors Should Rethink Old Buy and Hold Stock Strategy
Should you stay or should you go? In today’s market environment, investors need to be ready to move.


It’s hard, sometimes, to reconcile the euphoria of a record-setting bull market with predictions that it just can’t last. Especially when the media weighs in with headlines like this one from a 2015 MarketWatch.com piece by columnist Paul Farrell: “Stock-Market Crash of 2016: The Countdown Begins”
Or this one on a 2016 Bloomberg.com story by writer Suzanne Woolley:
“The Next 10 Years Will Be Ugly for Your 401(k): We’re About to Pay the Price for All the Good Times”
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Of course, the headlines often take it a step further than the actual articles. Woolley’s story wasn’t forecasting complete disaster – it was simply a warning to prepare for disappointment if you hope to make a decent return on your investments in the next decade.
Sometimes traditions need to change
“It doesn’t seem much to ask – a 5% return,” she wrote. “But the odds of making even that on traditional investments in the next 10 years are slim, according to a new report from investment advisory firm Research Affiliates.”
“Traditional” was her way of describing a portfolio with 60% stocks and 40% bonds. However, I would probably refer to that type of portfolio as “outdated.”
A typical stock-bond portfolio is meant to have a negative correlation in the short run – or, at the very least, a “slowing correlation.” When stocks go up, bonds act like a weight to the portfolio. When stocks go down, bonds act as a parachute. But both stocks and bonds are high right now – and it’s been that way for a while. Which means this type of portfolio is far from the model of diversification.
Time to get active
So where do we go from here?
The answer for many investors is going to be trading in their buy-and-hold strategy for more active portfolio management – paying close attention to market trends, shifts in the economy, changes in the political landscape and other factors.
It’s a strategy that’s made for modern times, when we have so many more tools and so much more information available to help make all those “when, what, why, where and how” investing decisions.
For an active portfolio manager, the goal is to limit risk while growing your money. And that requires moving it when necessary – sometimes out of the stock market altogether.
Yes, there are good times to be in the market and bad times to be in the market. Unfortunately, people often get in or out for the wrong reasons – mostly because of greed or fear – and they make mistakes in the process.
Remember the movie Wall Street, when Gordon Gecko said, “Greed is good”? Forget that. Discipline is good.
When you invest in something, you should do your research. And you should not base your financial decisions on what’s going on in the news. You should stay in until some fact-based evidence says you need to get out of that particular investment, unemotionally.
And then you should be ready to go.
Does this 401(k) story sound like you?
I’ve seen 401(k)s where the only real growth for years has been from the automatic deposits the investors have been making. And that’s a problem. The investors are buying and holding or, if they don’t buy and hold, they’re managing it themselves, and their behavior is compounding the problem because they sell at the worst time. They hold on for so long, and, finally, they sell out of fear – usually toward the bottom. Then they wait for the market to “prove itself again,” and when it reaches new highs, they get back in.
It really takes a knowledgeable financial professional, preferably a fiduciary, to know when to make those moves – someone who has the guts to get out and the experience to know when to get back in.
If you’re confused by mixed messages in the media, or you’re concerned about what could happen in your own portfolio, consider working with a fiduciary who will take an active role in managing your account.
Talk about that person’s track record, strategies and philosophy. Make sure their views fit with yours. And make sure you’re comfortable with your choice, because you’ll want to be in contact on a regular basis.
Kim Franke-Folstad contributed to this article.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Michael Martin is the co-founder of South Florida-based Legacy Financial Partners, where he is the director of investments and insurance. He is a fiduciary and holds his Series 7 and Series 66 securities licenses. He also maintains life, health and variable annuity licenses in Florida, West Virginia, North Carolina and Illinois.
Securities and advisory services are offered through, Madison Avenue Securities, LLC ("MAS") Member FINRA/SIPC and a Registered Investment Adviser. MAS and Legacy Financial Partners are not affiliated entities.
-
Stocks Rise to End a Volatile Week: Stock Market Today
The market's fear index reached and retreated from a six-month intraday peak on Friday as stocks closed the week well.
-
Kiplinger News Quiz, Oct 17 — Longest Government Shutdown?
Quiz We covered stories about the shutdown, Medicare and vehicle recalls this week, but why? Test yourself on the latest financial and business news.
-
Treat Home Equity Like Other Investments in Your Retirement Plan: Look at Its Track Record
Homeowners who are considering using home equity in their retirement plan can analyze it like they do their other investments. Here's how.
-
Why Does It Take Insurers So Darn Long to Pay Claims? An Insurance Expert Explains
The process of verification, investigation and cost assessment after a loss is complex and goes beyond simply cutting a check.
-
Two Reasons to Consider Deferred Compensation in the Wake of the OBBB, From a Financial Planner
Deferred compensation plans let you potentially lower your current taxes and help to keep you out of a higher tax bracket. It's important to consider the risks.
-
Financial Fact vs Fiction: The Truth About Social Security Entitlement (and Reverse Mortgages' Bad Rap)
Despite the 'entitlement' moniker, Social Security and Medicare are both benefits that workers earn. And reverse mortgages can be a strategic tool for certain people. Plus, we're setting the record straight on three other myths.
-
The End of 2%? An Investment Adviser's Case for Why the Fed Should Raise Its Inflation Target
Yes, inflation can be tough on those living on fixed incomes, but protecting us from it too strictly could do our overall economy more harm than good.
-
Medicare Open Enrollment: Why You Need to Pay Extra Attention to Part D, From a Financial Adviser
The lowest premium for prescription drug coverage might not actually save you the most money. Make sure you take copays into consideration and do the math.
-
How the One Big Beautiful Bill Will Change Charitable Giving
Taxpayers who don't itemize will be able to take a bigger deduction for donations, which could boost giving. However, high-income donors could see their tax benefits reduced.
-
A 'Fast, Fair and Friendly' Fail: Farmers Irks Customers With Its Handling of a Data Breach
Farmers Insurance is facing negative attention and lawsuits because of a three-month delay in notifying 1.1 million policyholders about a data breach. Here's what you can do if you're affected.