The Death Of The Buy And Hold Investor

As Jake Zamansky from Spy reported, the conventional advice retail investors received from the financial advisors over the last several decades was to “buy and hold” good-quality stocks, bonds and mutual funds. This strategy, we were told, would finance our kids’ college educations and our retirement. Now, it seems that “buy and hold” is just for suckers.

Such investors are sitting ducks for the new breed of “high frequency” traders, the nefarious “dark pools” and Wall Street firms who use retail investors as dumping grounds for their dubious products and shares. Arecent blog by CNBC producer John Melloy underscores how out of sync buy and hold investors are with the market. Indeed, the amount of data showing the disadvantage traditional, long-term investors currently face is staggering.

As Mr. Melloy points out: “The average holding period for the S&P 500 SPDR (SPY), the ETF which tracks the benchmark for U.S. stocks, is less than five days, according to worrying statistics in analyst Alan Newman’s latest Crosscurrents newsletter.”

“‘Given recent average volume, the SPY trades its entire capitalization and then some each and every week. Does anyone really wish to argue where valuation might enter the picture in this scenario? Value does not matter in the slightest,'” according to the analyst.

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