Should You Buy And Hold Shares In Today's Markets?

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Should You Buy And Hold Shares In Today's Markets?

Should You Buy And Hold Shares In Today's Markets? By: James Woolley There have been lots of people speaking on the financial news channels recently about buy and hold being a redundant strategy in the current stock markets. Their argument is that short-term trading is a much better strategy, but is this really true? I personally believe the wild volatile swings we are seeing at the moment are not necessarily a trader's dream at all. You still have to call these wild moves correctly and if you're not careful you can easily see your trading capital quickly destroyed as stop losses get triggered very quickly with these huge price moves. Of course there are potentially big profits to be made because certain stocks can easily gain or lose 10-20% in a single trading session. However not many traders are sufficiently skilled to take advantage of these huge price swings, and to some extent they are almost impossible to call because the markets in general swing wildly with every economic news announcement. So therefore I still personally think that buy and hold is equally as profitable. It's certainly a lot less risky because at least if you are buying stocks you can only lose what you put in, whereas if you trade stocks on a short-term basis, you can lose substantially more than your initial trading capital if you make use of leverage. Furthermore the current economic crisis has resulted in virtually every single company being sold off heavily. As a result there are some excellent highly profitable companies out there who are currently trading at bargain prices based on their price-earnings ratios and other valuation measures. Of course the recession will inevitably hit these companies' profits but to a large extent this is already in the price. Certain sectors in particular, such as the oil and mining companies are excellent value in my opinion because there are lots of profit-generating companies trading on single-digit PE ratios, and I think that when commodity and oil prices do bounce back in the next few years, then these companies share prices should be a lot higher than they are now. Warren Buffett is still investing with a long-term view in mind and I too still believe this is a sound investment strategy, particularly if you reinvest any dividends along the way. You should always buy low and sell high, and these markets certainly present investors with the chance to buy low. It's just a case of waiting for the economic climate to recover, which could take a good few years, but there will be a time when the stock market is trading a lot higher than it is today.