Buy, Hold, and Sell!

Chapter 17What's beyond the Buy-Hold Myth?

Now you realize that buy-hold advice doesn't make sense for retired investors. You understand the fallacies behind the myths. You know that:

• The market may take 25 years to come back—if it ever does.
• The market's 20 best days occur randomly. It's impossible to make sure you don't miss them.
• Selling doesn't make you a fool unless you sell in a panic.
• Diversification can buffer you against losses, but it can't save you.
• You may be better off sitting in cash than sinking in a bear market.
• You can lose, even if you haven't sold.

You know to avoid the buy-hold strategy, but what do you do? You create a plan that allows you to get out of the market at a predetermined point, without making an emotional decision. You create a sell strategy.

Not Market Timing

As a proponent of sell strategies, I've been called a market timer. I'm not. I'll be the first one to say you can't time the market. Besides the fact that there are too many variables and too much volatility, it's impossible to choose the perfect time to invest based on the market's behavior, so you should not even try. To illustrate my point, let me ask you a question: Would you rather invest when the market was going down, or when the market was going up? I bet you'd say, “I'd rather invest when the market was going up. I want to invest in a market that's rising.” Now let me ask you the same question in a different way: Would you rather invest when the market was down, or when the ...