Back in the day, you would buy and hold onto stocks throughout your life and as you approached retirement you would sell the stocks to cover expenses, buy that farm or retirement house in the Tropics or whatever you want. For the last twenty or so years, stock ownership has been marketed as more than ownership in a company but a way to make a quick profit.
The truth is, you can make a quick profit but you can equally make a quick loss. Fundamentals of investment point out that for every investment there is a person who makes money in the transaction and another person that loses money. How can you make a profit doing this?
One answer I like to tell people is to take the big picture. For large, well-funded multi-billion dollar firms, you need to take the long horizon view. You should buy shares in the company and hold onto them. Does that mean that you should forget about them? By all means, NO!
You should monitor the company’s progress, follow the press releases, follow any news on their industry and make your own well-researched, non-emotional choice as to what to do or not.
The problem in the last few days with the stock market is that people are reacting with their gut to non-news. Yes, some banks are going under. Yes, some businesses are having problems.
Not ALL companies are having problems. A lot of firms are being sold off because some of them were held by financial institutions that need cash, people who are short-sellers or because of fear.
If the underlying fundamentals for a company have not changed, why sell it off? Do you need the money right away? If so, do it. If you don’t, don’t. Has there been some change in the market fundamentals or if you are a charter, in the dynamics of the stock? Did you get a signal to sell?
Ultimately you make the choice, just remember that sometimes it is better to buy and hold onto to something and not respond to the knee jerk responses of the public.
Be safe and sane!
Kim Isaac Greenblatt
Kim Isaac Greenblatt asks if you know of the lost art of buying and holding a stock.
Tags: bonds, Business, investments, Kim Greenblatt, profitable, stocks