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Is Buy and Hold an Outdated Investment Strategy?
July 26, 2018 / Chris Ravsten
In our opinion, the investment strategy of â€œbuy and holdâ€ has become outdated and maybe even obsolete. With the advent of powerful computing technology, artificial intelligence and the vast amount of readily available market data, there are now mathematical algorithms that can help you in the effort to achieve a consistent stream of investing success with far less risk than the S&P 500 index. Now you can strive to beat the S&P 500 index instead of just mirroring it.
In the early 1950â€™s, Modern Portfolio Theory (MPT) was introduced as the break-through investment management process of the century. Since then, many investors have tried to beat the performance of MPT using strategies like active management, market timing, sector rotation and many others. However, these strategies never produced consistent results because the investor had to be correct twice in the process, once when they bought the investment and then again when they sold the investment. This has been impossible to do without modern technology.
Thankfully, this is no longer the situation. New options are now available for investors who want more than a passive investing strategy. With advanced computer technology and mathematical algorithms, investors can now choose from a multitude of portfolios that have solidly outperformed their respective benchmark indices, including the S&P 500 index, with less risk and volatility. And this level of success has not been consistently experienced before.
Wouldnâ€™t it be more satisfying to be diversified in actively producing assets only when they are actively producing, and then selling out of them, when they arenâ€™t actively producing? Why does being diversified signify a need to own losing investments? You no longer have to settle for benchmark-like returns, just because your investment advisor or some large fund manager says you should.
Now you can make investments compete for your money, rather than your money being placed in passive, unproductive assets. Welcome to the future of investing!
Foxstone Financial is a Denver-based investment advisor that uses the latest artificial intelligence investment technology, decades of market experience and a network of specialized partners to serve clients that expect better than average.