Buy & Hold Is Not a Good Strategy In This Environment – Here’s Why

…The market recovery from 2009 has been the most artificially elongated in history. If your investment plan assumes this uptrend will continue indefinitely or tread water as central banks remove their ’emergency’ support and a risk-appetite recedes, you are banking on unprecedented miracles and may want to re-think…

 

The chart below shows price cycles in the S&P 500 since 1994:  Want your very own financial site? #munKNEE.com is being given away – check it out!

(Click on image to enlarge)

The correction since January is only a tiny start in the mean reversion cycle that is due for stock and corporate debt markets from present levels. A drop of 50% would just return the benchmark S&P 500 near its 2000 and 2007 cycle tops. History suggests that would be a fairly modest outcome in present circumstances, believe it or not.

Conclusion

‘Buy, hold and hope’ at high valuations has always been a dangerous financial strategy; but given the extraordinary monetary experiments and debt-fuelled speculating of the past decade, it has never been more dangerous than today.

…It is still not too late for thinking people to review their present holdings and consider how steep price declines will impact their financial and life plans over the next decade and beyond.

(*The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)