Is Buy and Hold Dividend Investing Dead?

Back in late 2008 and 2009 many investors were asking themselves whether it was worth it to be invested in the market. Business journalists and hedge fund managers were using this to question whether buy and hold was still relevant today. Now that the market has increased significantly since hitting its March 2009 lows, many investors are realizing that buy and hold still works. The difficult part of buy and hold investing is sitting through declines in the stock market, while being fully invested. Another problem with buy hold is that investors could start believing the hype that it would have been possible to “time the market" and exit at the right time, right after the market hit its highs, and thus become market timers. Many such investors are still in cash, thus missing most of the recovery in stock prices. It is very difficult not to succumb to the temptation of actively managing your portfolio, especially given the ease of access to markets over the internet.The main problem with trading however is that if you trade you incur significant transaction fees and trigger tax liabilities that you otherwise would not have incurred with a buy and hold strategy. In addition to that, once you sell you can miss any big moves in the market. Another risk is that the company you purchase with the proceeds from the first investment could turn out to be a poor performer. Most investors will never be successful in timing the market, especially since they get scared at the bottom and greedy near market tops. As a result academic studies have found that most “active” individual investors tend to underperform the market averages particularly due to overtrading.... Read more