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Chapter 9. Holy Grails > Buy-and-Hold

Buy-and-Hold

After the stock market bubble burst in spring 2000, the concept of buy and hold as a trading strategy must have been shown as the failure it is once and for all. Yet, four years later, investors still buy and hold because they are unaware of the alternatives. Investors still obey mantras like: “Buy and hold for the long term.” “Stay the course.” “Buy the dips.” “Never surrender.” Buy-and-hold mantras are highly suspect because they never answer the basic questions: Buy how much of what? Buy at what price? Hold for how long? Jerry Parker gives a strong rationale for choosing Trend Following over buy-and-hold:

“Trend Following is like democracy. Sometimes it doesn’t look so good but it’s better than anything else out there. It’s a worse investment now, let’s say, than it was in the ’70s or ’80s. But so what? What other choice do we have? Are we going to buy market breaks? Are we going to rely on buy and hold? Buy and hope, that’s what I call it. Are we going to double up when we lose money? Are we going to do all these things that everyone else does? Eventually people will come to understand that Trend Following works in other markets, markets that produce trends.”[5]


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