How To Buy And Hold

One of the most believed bits of conventional wisdom from Wall Street is to Buy and Hold. Any stock or mutual fund should be put away for eternity and never sold. This is total hogwash and is guaranteed to reduce your investment income.

Brokerage companies never will advise you to sell. Last year over 1,000 stocks on the Nasdaq lost more than 90% of their value. During that same period of time brokerage companies issued 33,000 (yes, that's right, thousand) recommendations for their clients. Of that 33,000 only 125 were "Sell". What happened to those "expert" analysts who were telling you to buy on the way up? Couldn't any of them figure out to tell you to get out when a stock was headed down at breakneck speed?

When you want to know something I have a favorite method. It is, "Follow the Money". Where does a brokerage company make its greatest return? Not on commissions as you might think. It is selling a new issue of stock or a secondary issue for a company now in business or debentures of some kind. We are talking about big bucks here. Minimum six figures and most times seven figure commissions for the brokerage company. Just one of these more than makes up for the customers piddling commissions.

If the brokerage company analyst tells the truth that he doesn't think a company is a good buy anymore and to sell you can be sure the executives at that company have a long memory should they decide to sell more stock. Issuing a sell signal would be the death knell for the brokerage company ever selling any new issues for that company. And the analyst would probably get fired.

Instead of telling you to Sell they downgrade the company from Buy to Neutral or Accumulate or Underperform the Market or Hold. The latter is the worst rating you will see. Any downgrade is your signal to Sell immediately.

There is a successful way to Buy and Hold, but it will take about 15 minutes of your time each week. You could do it monthly, but you will have better results if you do it weekly. One of my basic criteria for owning any stock or mutual fund is that it must be going up. Not down or sideways. Let's say you have from one or several stocks in your portfolio. On Saturday morning you look at the closing price of the stocks you own. You figure out what 10% of the closing price would be. You might want it to be more or less. For example, if the stock is $40 per share that comes to $4. On Monday morning you call your broker and place an Open Stop Loss order for $36. Never lower the price. If the stock sells down to that level you want to be sold out.

The Hold side of the Buy and Hold formula has been met. You held it while it was going up. You don't want to hold it while it is going down, do you? This is the right way to Buy and Hold, not the way Wall Street tells you. You bought. You held. You got out with a profit (or a very small loss). Congratulations. You have outsmarted Wall Street.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

In The News:

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MFs, FIIs bought these 16 stocks consistently in last 1yr; what should you do?  MoneycontrolThe market has tanked since the budget on July 5. Investors have lost about Rs 12 lakh crore in terms of market capitalisation on the BSE since then. The freefall ...
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How balanced ETFs simplify life for parents helping their kids by investing in RESPs  The Globe and MailPlease log in to bookmark this story. Log In Create Free Account. Find your bookmarks by selecting your profile name.
Why picking the right mutual fund is key in a tough market  LivemintWhy have mutual fund (MF) returns fallen? Mutual funds primarily invest in equity (stocks) or debt (bonds). On the equity side, mid and small cap MFs have given ...
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MF shopping list: Top 30 stocks that fund managers bought & sold in June  MoneycontrolMutual funds increased allocation to private banks, consumer, utilities, technology, NBFCs, retail, metals and PSU bank stocks in June, an ICICIdirect report said.
What India's three largest mutual funds bought and sold in June  LivemintInflows into Indian equity mutual funds jumped the most in three months in June.India's top money manager HDFC Mutual Fund held $22 billion in equities.
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Mutual funds’ exposure to this space at all-time high; should you buy?  Economic TimesMoney managers on Dalal Street continued to shower affection on private banks for the ninth successive month as their exposure hit 19.90 per cent in June, ...
What India's top three mutual funds bought and sold in March  Economic TimesIndias largest money manager held 1.5 trillion rupees in equities.
A young investor’s guide to mutual funds  Economic TimesMany young investors, who are barely a year or two old in their career, are eager to start investing in mutual funds. ETMutualFunds.com receive many queries on ...
All you need to know about liquid mutual funds  Economic TimesThe NBFC crisis has brought liquid funds back in favour as they carry lower risk than corporate FDs.
Here are a few mutual funds that stocked up on YES Bank in Q4FY19  Business StandardShares of YES Bank tanked 30 per cent in trade on Tuesday, after the bank reported a massive Rs 1,507 crore loss in the fourth quarter of financial year 2018-19 ...
Govt increases limit to disclose investment in stocks, mutual funds for employees  Moneycontrol.com*Service* rules say no government servant shall speculate in any stock, share or other investment.
Mutual fund SIPs don't make equity investing risk-free. Here's why  Economic TimesSIPs do reduce the risk of market timing & allow investors to buy more units when their price falls.
Index mutual funds see 60% jump in assets in a year as actively managed funds struggle  Economic TimesIndex mutual funds — a category that aims to mimic returns of benchmarks, like Nifty or Sensex — have seen their assets surge 60% over the past one year as ...
Our Ultimate Stock-Pickers' Top 10 High-Conviction and New-Money Purchases  Morningstar.comFor the past decade, our primary goal with the Ultimate Stock-Pickers concept has been to uncover investment ideas that not only reflect the most recent ...
Mutual funds shooting themselves in the foot?  Economic TimesWhat if banks take a leaf out of Kotak and HDFC Mutual Funds' decision to direct investors to come another day to get their money instead of paying them on the ...
What top mutual funds bought and sold last month  LivemintMumbai: Inflows into Indian equity mutual funds in January were the smallest in two years as heightened market volatility and political uncertainty cooled ...
Actively-managed large cap mutual funds poised for a comeback  Economic TimesDefying predictions of their imminent irrelevance, some actively-managed large cap mutual fund schemes have bounced back to the top of the return chart.
Are you thinking of investing in small and mid cap mutual funds? Here is some advice from fund managers  Economic TimesMutual fund investors have started flocking to mid cap and small cap schemes once again. According to AMFI data released on Monday, the mid cap mutual fund ...
What India's top three mutual funds bought and sold in May  LivemintInflows into Indian equity mutual funds in May rebounded from the smallest in 31 months as Prime Minister Narendra Modi's comfortable electoral win spurred ...
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Stick to MFs if you lack knowledge on stocks  LivemintWhile equity is surely the way going forward considering your age and the financial goals, how you buy in equity is important.Direct stocks work very well if done ...
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Here's a look at the mutual fund favourites in May  MoneycontrolThe second month of FY19-20 saw a notable change in the sector and stock allocation from the top 20 mutual fund houses. On a month-on-month basis, MFs ...
Why do wealth managers recommend multi cap mutual funds?  Economic TimesMany wealth managers believe multi-cap funds are a good starting point for long-term investors, specially those using SIPs for wealth creation.
Should you invest in algorithm-based quant mutual funds?  Economic TimesQuant funds work on a data-driven model that relies on a mix of parameters and algorithms to identify the right stocks at the right time. But can they beat actively ...
MF portfolio doctor: Babji needs to exit direct investments in stocks, take mutual funds route  Economic TimesThe Portfolio Doctor assesses the health of the fund portfolio, examines the schemes and their suitability with regard to the goals.
How income from stocks and mutual funds are taxed for an individual  Moneycontrol.comCapital gains from transfer of unlisted share are considered as STCG where period of holding is less than or equal to 24 months, and LTCG when holding period ...
Investment limits Sebi prescribes for mutual funds  LivemintIn case of unrated debt instruments, a mutual fund cannot invest more than 10% of the portfolio in a single issuer and 25% in all such securities.In case of listed ...
Top 25 equity mutual funds failed to deliver positive returns in June  Economic TimesNEW DELHI: Top 25 mutual fund schemes, managing retail money in excess of $1 billion (Rs 7,000 crore) each, failed to deliver positive returns in June.
Mutual funds sell several blue chips stocks, buy mid-caps in March  Business StandardDomestic money managers were seen pruning their holdings in several blue-chip stocks, including Reliance Industries (RIL) and Housing Development Finance ...
Top 8 most common mutual fund investing mistakes and how to avoid them  Business StandardMutual funds garnered Rs 8,022 crore of its assets by way of SIPs in December 2018, 29 per cent higher than the previous year | Illustration: Binay Sinha ...
What to do if your mutual fund scheme earns more return than your investment  Economic TimesAre the returns shown in your mutual fund account statement same as the returns delivered by your fund? It is quite likely that you might have earned less than ...
Best mutual funds to invest for five years  Economic TimesIf you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.
First-time investors can look at these mutual funds for long term  Economic TimesInvestors, who were waiting on the sidelines for the uncertainty to recede, are now looking to deploy their cash. But, valuations remain steep.
7 stocks most favoured by mutual funds over last one year  Economic TimesAs the markets hit a speed bump, stocks favoured by mutual funds appear to be safer bets.
Equity funds record highest ever exposure in banking stocks in March 2019  Business TodayAs per the latest data available from the SEBI, overall deployment of equity funds in bank stocks grew around 52 per cent year-on-year (y-o-y) in the month ...
Top 30 stocks that fund managers bought & sold in March; do you own any?  Moneycontrol.comData for equity flows into a mutual funds for March came as a breather after a weak February. Increase in net inflows in equity and income category led to the ...
I have been investing in mutual funds via SIPs. Should I make any changes in my schemes?  Economic TimesI have been investing for the past year in the following funds via SIPs: Rs 2,000 in SBI Magnum Multi Cap, Rs 1,000 each in SBI Equity Hybrid Fund and Canara ...
The dangers of high mutual fund inflows  LivemintMutual funds have put ₹2.4 trillion into markets in the last two years.Equity mutual funds receive ₹8000 crore monthly through SIPs.
Active mutual funds fail to reflect index gains  Economic TimesThe Nifty, which has hit all-time highs for the second time in April, has advanced 12% in the last one year. But these gains are yet to reflect in many mutual funds' ...
Best mutual funds to invest in 2019  Economic TimesWhich are the best mutual funds to invest? Most investors have this query before they start investing in mutual funds. Curiously, it is the first question most ...
What top 5 money managers bought and sold in February  Economic TimesFebruary was the fourth consecutive month of decline in net investment into equity mutual funds.
I want to invest Rs 1 crore in stocks and mutual funds for 5 years. How should I invest?  Economic TimesYou may consider the following asset allocation: 40% in large-caps; 40% in large and mid-cap, or multi-caps; and remaining 20% in mid- and small-cap funds.
A look at mistakes committed by investors of equity mutual fund schemes  Moneycontrol.comBalwant Jain. The interest of investors has been shifting from direct equity investing to equity mutual funds over a few years. Though this is a welcome trend, ...
Defaults, downgrades hit debt mutual funds: What investors should know and do now  Economic TimesAs debt mutual funds land in trouble following multiple defaults and downgrades by bond issuers, ET Wealth addresses some key questions from worried ...
Here’s a better tool to judge mutual fund performance than simple 1-year, 3-year returns  Economic TimesOne invests in mutual funds to earn potentially higher returns than those in traditional investment products, and I'm sure everyone looks at the one-year, ...
Should you build a diversified portfolio with just passive mutual fund schemes?  Economic TimesExperts say investors should not be lured by the low-cost structure of passive funds alone.
Stop! Too many stocks, mutual funds are not good for you; Buying too many may not get you more  The Financial ExpressHandling the overall risk of investments is crucial, but not at the cost of not meeting your financial goals. Over-diversification can do this.
Sebi allows mutual funds in exchange traded commodity derivatives  Economic TimesNEW DELHI: The Securities and Exchange Board of India (Sebi) on Tuesday allowed mutual funds to participate in exchange-traded commodity derivatives ...

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