"Why should you buy and hold? Because you are a long-term investor.
All you really need to do is to buy high-quality companies and sit on them.
Once you've done that, you can lie in your hammock and sip mint juleps.
Life will be good.
" I'm sure you've heard that advice.
It sounds good, as long as you don't consider it too closely.
But let's consider it closely: To begin with, how are you going to find those great companies that you can buy and ignore? And once you find them, how do you know what will happen in the future? JC Penney nearly went under recently, and there's some question about whether it will survive.
Other good companies haven't survived: Remember Montgomery Ward? And then there was the darling of Wall Street, the most-admired company whose profits went about up 20 percent a year: Enron.
People who invested in that "great company" lost everything.
So did the people who invested in good companies in 1929 when the market went down 92 percent.
Do you think your investment can survive a tumble like that? Secondly, when you retire you're not a long-term investor anymore.
If you're 30, and you don't plan to touch your money for 30 more years, you are a long-term investor.
If you are retired or within five years of retirement, you'll need to take money out of your investments pretty soon.
You can't afford to invest for 30 years.
Not only that, but you can't afford a big loss.
It takes too long to get your investments back to even.
Think about it: Right now we're celebrating the fact that the market is reaching all-time highs.
Great, but the last all-time highs were in 2007, six years ago.
If you had retired during this last six years and bought into the idea that you were a long-term investor, you'd be treading water, taking money out of an account that went down.
That's a terrible place to be.
Don't let yourself slip into that place.
Don't convince yourself that you're a long-term investor.
If you're over fifty, you're not in the market for the long-term anymore.
You're in the market so that you can have money to live on, now or in the near future.
To do that, you have to get rid of the old buy-hold advice, and you need to remember instead to buy, hold, and sell.