No matter what the market conditions are, investors are always faced with this peculiar dilemma of whether to adopt a buy and hold (forever) strategy or to exit stocks at regular intervals. Most so-called longterm investors adopt a buy and hold strategy and never sell shares even when the stocks have either multiplied or have fallen by more than 50 to 80 per cent. This is because the buy and hold temperament does not allow such investors to book early profit or loss. Thus, the perennial question is always about which option provides more returns. In other words, which strategy proves to be better in the long term: buy and hold or exit?
The answer to this question may not be objective. However, when we have a look at historical data and study how several investors have been stuck with underperforming stocks even after holding them for more than five years, we can say that there is a serious case for investors to consider adopting an exit strategy, either at the stock or the portfolio level.
Assuming a long-term investor adopts a buy and hold strategy and focuses on BSE 500 stocks as an investment basket, there is a good chance that he or she may have been stuck (negative returns) with at least 19 stocks (which made all-time highs in 2010) out of BSE 500 stocks even after remaining invested since 2010 till now i.e. April 2020. In other words, at least 19 stocks which were trending in 2010 and were bought by long-term investors adopting a buy and hold strategy did not manage to generate positive returns in spite of holding them for more than nine years!
This story is from the April 27, 2020 edition of Dalal Street Investment Journal.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the April 27, 2020 edition of Dalal Street Investment Journal.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
All That Shines is Gold & Silver
Precious metals gold and silver hold a special place when it comes to the investment journey of Indians. They help diversify investment risks and provide a hedge against market volatility, making them an essential component of a well-rounded investment strategy. Vaishnavi Chauhan explores the impact of precious metals on your portfolio.
All You Wanted To Know About SIP
Is rupee cost averaging effective across all market phases, including uptrends, consolidations and downtrends? You probably might not have observed its performance in each phase or may have exited investments upon seeing negative returns. Rakesh Deshmukh takes a closer look at the scenario
When Is The Right Time To Sell Mutual Funds?
Imagine this scenario: You have diligently crafted your mutual fund portfolio, aligning each investment with your financial objectives and risk tolerance. All seems well until one day the market takes a steep dive, injecting uncertainty into your investment journey.
Middle East Tension Disrupt Global Equities
In the past fortnight, global stock markets experienced a rollercoaster ride, due to continued inflation concerns and escalating tensions in the Middle East. This confluence of events triggered a flight to safety, pushing investors towards safety assets
Gold and Oil Stay Solid Amid Escalating Geopolitical Issue
A boom in select commodities has threatened the central banks' inflation fight and interest rate cuts and now the gloves are coming off for them as they try to tame inflation
India - A Cure For Pharma Outsourcing Woes?
Eroom's Law, the grim corollary to Moore's Law, paints a concerning picture for the pharmaceutical industry.
Infrastructure Sector Is It Reaching For The Skies?
With the upcoming Lok Sabha elections looming, many of us may be feeling the urge to invest in infrastructure stocks, hoping for a favourable impact on investments if a strong political mandate ensues. Mandar Wagh delves into the government's emphasis on infrastructural development, future growth triggers and the critical factor of fundamentals that must be taken into consideration before investing
STABILITY ROCKED BY COMPETITION
While the company’s product portfolio and availability through various retail channels is undoubtedly impressive, the increasing competition posed by start-ups in the organised sector and the tendency of young consumers to try out various brands instead of displaying single brand loyalty is an issue of concern when it comes to future growth prospects
Launches A Wide Range Of Air-Conditioners
A leading name in the consumer electronics industry known for its innovative and cutting-edge technology, Cellecor Gadgets Limited is now stepping into the domain of air-conditioners, all set to make them available across India starting this month
Domestic Markets Spin Into A Higher Orbit
The domestic market experienced a period of volatile trading sessions over the last two weeks, predominantly characterised by upward momentum. According to data released by the Ministry of Commerce and Industry, the index of eight core industries for February 2024 showed a growth of 6.7 per cent, an increase from 4.1 per cent in January 2024.