Best Syndication News

In the last few weeks I've heard several commentators say that the buy and hold strategy is no longer an effective strategy in today's markets because it's purely a trader's market. So is this true or is this an ill-informed opinion?

Well my own view is that yes the volatility in today's markets certainly throws up plenty of short-term trading opportunities. You can go long and short via spread-betting companies or through trading options and futures, and you can rack up big gains (and big losses) in as little as a few hours.

In fact it's not uncommon for certain stocks to go up or down 10-20% in a day which is incredible when you consider that most investors would settle for those sorts of gains in a year. These are volatile times but that's not to say that you can't make substantial profits through the tried and tested buy and hold strategy. You only have to look at Warren Buffett, the greatest buy and hold investor of them all. He's still buying shares in good quality companies and tucking them away for the long-term, and I think this is a good investment strategy.

Yes the economy is looking weak at the moment but to a large extent this is now priced into the share prices of the individual companies. Furthermore a lot of shares have been hugely sold off my mutual funds and hedge funds which has pushed these stocks far below their true market value in a lot of cases. So this has created an excellent buying opportunity in my view.

Some sectors are better value than others but I think oil and mining companies in particular have been sold off far too heavily. This is certainly not investment advice, but I think many of the top companies in these sectors will be trading significantly higher in the coming years when commodity and oil prices almost inevitably bounce back.

The key to building wealth through stock market investment is to buy low and sell high, and the current stock markets certainly present the investor with an opportunity to buy low as there are lots of good quality profitable companies out there that are currently on very low valuations.

So my overall opinion is that the buy and hold investment strategy is still an excellent strategy even in today's markets. If you only buy quality companies with little or no debt and rising profits and dividends, and reinvest any dividends back into the market, then you should do very nicely in the next few years when the economy hopefully starts to pick up again.

Click here to read James Woolley's review of Options University and to learn about the options trading software that he most recommends.