Does the "buy and hold" strategy work for older investors as well?
It seems like the "Buy & Hold" strategy is only advantageous for younger investors who have a lot more time in their investing horizon. Not to say "putting it all on black" and rolling the dice as if you were in Vegas is prudent for an older (comparatively speaking) investor makes much sense either, but I'm wondering if this strategy (Buy & Hold), while certainly conservative, still makes sense for a seasoned (read: old) investor?
Opinions?
Experiences?
Answers
265 points
MaverickInvestor answered 2 years ago …
I don't actually call it 'buy and hold'.
I call it 'buy and pray'!
The problem is, if you buy a stock and do nothing else, you can only profit from a rise in the stock price (and the occasional dividend pay-out). To me, that's tantamount to buying a piece of real estate and leaving it empty, waiting to profit when the value goes up.
On the other hand, using covered calls (one of my favoured strategies!) you make money if your stock rises, or if it does nothing, or even if it falls. You have more bases covered, and you generate a monthly income while you wait for the big move.
In effect, you're renting out your shares.
For more info, check out
http://maverick-investor.com/go/options_strategies/covered-calls/
104 points
slipperyrazor answered 2 years ago …
It works for me if I set a specific date to sell the stock; after all else fails i.e. stock stays flat or falls in price. Being in my 60's ,buy and hold is not at the top of my strategy priority list but it does have its uses. A better idea is a fixed income security or some such vehicle. Time is a major factor in this equation. Best to you and yours.....slipperyrazor
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4037 points
MNSL answered 2 years ago …
Definitely it will work for everybody provided you have selected correct stock. However for old investor it is better to keep more cash. I heard recently, about losing their entire retirement investment due to wrong advice from so called professional investment advisors including some banks. I really felt sorry for these some old investors in some countries.
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381 points
SirCrashton answered 2 years ago …
This strategy would be useful if one were to invest in a profitable company set up as a royalty trust which, for tax purposes, must pay out the bulk of its earnings in dividends to shareholders. Several Canadian companies are set up this way but there is a concern that the tax laws may change in 2010. Also, investing in companies that have a record of increasing dividends could provide income while the stock appreciates over time.
I agree with MaverickInvestor: selling out-of-the-money covered calls is the way to generate a consistent stream of income while guaranteeing a profit if the price rises rapidly and the stock get called away from you.
699 points
7million7years answered 2 years ago …
Unless you have the ability of a Warren Buffet to select an individual stock that is "almost sure" to rise, you have no choice BUT to buy-and-hold ... the difference is that as you get older, you will be looking more for Buy-and-Hold-For-Income than Buy-and-Hold-For-Growth.
ANYTHING else is 'gambling' and you need TIME to recover if you choose this potentially higher risk/reward strategy ... and, TIME is something that us Older Blokes (hey, I'm 49 and retired ... that's ancient!) don't have ;)
2786 points
Oldman answered 2 years ago …
I hold some securities purchased > 20 years ago. Occasionally added more to the positions when their sector got beaten up. All were stable companies with dividends, and not for cap gains.
Check out 10 year charts of MKL and NVR ... which don't give divs but have reaccreted their earnings to their share prices ... vs HCP and NHP which do pay divs, or O, which is a dividend builder type, or ACAS, which has paid out almost its current price in divs over the last five years.
You probably should limit the security to <5% of your portfoloio's total value at purchase and set a "Sell" point at which you don't want to risk a substantial loss.
There are mutual funds from Fidelity that vary in share price, but have really long term excellent dividend-paying history: Capital & Income and New Markets Income. try to buy these when their share prices are reduced below their yearly highs ... they won't go out of business.
138 points
Bob answered 2 years ago …
Of course buy and hold works for codgers! I'll have to admit if I'm not one yet, at 60 I'm getting close!
If you're interested in learning one particular strategy of buying and holding stocks for a relatively long term, 5 years plus, you should consider joining NAIC (better-investing.org). Don't let the amount of information there overwhelm you. The simplest way to take advantage of their strategy is to just follow the monthly picks in their magazine. Or you can spend some time and learn how to do it all yourself, or join one of the 11,600 clubs they support.
They have been around since the 1950's doing the same old boring thing year after year with long term results around 15% average per year (your money doubles every 5 years). Their strategy comes from the same mentor Warren Buffet learned from, Ben Graham!
There are plenty of old codgers on their membership roles!
Personally, I go for a mixed bag of NAIC picks, my own picks like the mighty MO, and income stocks like those others have mentioned - BDC's like ACAS, REITS, and I've been watching those Canadian and American royalty trusts.
4086 points
EthanR answered 2 years ago …
Older investors need to have a very carefully balanced portfolio, with good diversification between stocks, bonds, and cash. Diversification with a little in international, and a little in gold too. Nothing too speculative should be held, unless you want to practice saying "Welcome to Wal-Mart!"
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945 points
jillybeansisme answered 2 years ago …
First of all, being an "old codger" is a relative term. A friend of mine died at age 48. My Grandmother lived to 90 and an Aunt lived to 97. What is your life expectancy? Are you healthy and living a relatively healthy lifestyle? I'm 50 and expect to live another 35-45+ years because I'm incredibly healthy; therefore, buy and hold within reason is fine as is a more aggressive position. Your risk tolerance is also important. Are you making informed decisions or letting some commission hungry broker do that for you? What are your objectives? Do you currently need an income from your account or is this for a bit further down the road?
Any securities that you hold should definitely be limited to 3-5% of your total portfolio;
You should have a trailing stop loss on the security so that you limit your downside (for example, I bought POT at $85.12. It's high was $164.28. My trailing stop is at $139.64. Right now it is at $155.21 -- so I have wiggle room for this volatile market.)
You should have an exit strategy. ( I sold some of my position at $150 just to take some profits.)
You should not keep all your eggs in one basket; i.e., diversify (among sectors, value-income-momentum-small cap-large cap-foreign-etc.).
Options trading is strictly for those who truly understand it or can take the time to learn it. I feel they are like commodity futures trading contracts -- too high a risk. Personally, I prefer stocks and ETFs.
Oh, and this "old codger" has a 23 month-old toddler! As I said, "old codger" is a relative term and you need to look at it from your own personal perspective!
