Buy and hold versus timing the market versus day trading

1. Day trading
This is purely based on short term technicals, emotions, psychology and news. Not recommended as there is no way we can react faster than then pros and we do not have access to insider news.


2. Buy and hold.
All mutual funds recommend buy and hold because they make money through their 2.6
Per cent MER. Plus the guys with the big money just want the little guys to provide stability in the market so that they can control it.


Few key pts about the 20 yr buy and hold strategy


After the great dep there was significant gains then followed by decades of slow growth between 1950 to 1980. Then the explosive tech growth from 1980 to 2000. If u bought and held in that period u would have done really well. From 2000 to 2010, depending on when you bought, you could have ended up basically flat with no return.


3. Timing the market - Macro timing not day trading
If you bought when others panic and sold when the market recovered - buy during the tech crash or the war or financial crisis and sold 1-2years later, during those 10 years, you would have made 2-3x.


We need a combo of buy and hold and timing to effectively invest. Buy and hold during industrial or tech revolutions, time during other periods. Example - currently food is going to be the next thing that's going to slowly appreciate over the next 10 years as the world craves more meat and better food in Asia. Other stories like metals and tech had really good runs but there is no major revolution in the near future like the internet boom or iPod iphone explosion. These are old stories.


We have to think Japan and the high debt loads of people govts and companies today. Debt is great for expanding and growing but it's using future money. Sooner or later it needs to get paid back.




So conclusion. Buy good companies during distressed times and hold long term. Take profit after a good run because nothing goes up forever. Patience is the key, no one is saying you have to time the market by going all in and then all out. Gradual buying, opportunistic buying and finding bargains where others are chasing something else hotter (buy gold and oil in 2000 when everyone was buying tech).....


Thinking that buy and hold works all the time even in 20 year horizons is wrong. If u bought in 1950 to 1970 or 2000 to 2007, you would have ended up no better of than a GIC.


Same with real estate..... Buy low sell high.

Food for thought ------
Mutual funds say buy and hold and give me MER - bull s
Ponzi says buy and I promise to give you 20percent returns - bull s
Day traders say I can beat the market every day - more bs


Buffet buys good companies at a bargain prices and holds - he never chases something he does not know or buy when the asset is expensive. By the way he sells too but he never tells anyone because it will lead to a stampede out of the stock, he just quietly and gradually unloads..... Sound familiar?


The debate continues..... And this is why we need to operate in the space of researching and discussing areas of macro changes positive or negative. Micro is too hard because we are not insiders or have privy to inside info. Macros examples include debt levels, japan syndrome, aging population, tech explosion and internet growth. Being able to recognize areas of growth and invest in it will bring buffet level type wealth to those that can figure it out.