Investment Newsletter #16 (Jan 16, 2000)

Is Long-Term Investing "All But Dead"?

An interesting news story appeared in the New York Times on Jan. 15th. It said the approach to investing that has "made the most money for investors", that is, a long-term term strategy, "is all but dead".

Although especially true for investors in individual stocks, even mutual fund investors are selling their investments nearly three times as quickly as 10 years ago; the average investor now holds a fund less than four years. The article goes on to point out that studies have shown that more rapid turnover is statistically related to reduced returns for those investors. Although people who sell frequently may still have decent returns, those investors who hit the "jackpot" are usually the few people who resist "the trading rush".

We couldn't agree more; that's why we urge you to keep a "core" holding of stock funds, that is, a chunk of investments which remain relatively unchanged throughout the years. However, we do think that there can be significant added value in recognizing when to seek out areas that are undervalued, and in shifting a small percentage of your investments very, very gradually into these areas. That is one of the objectives of these Newsletters: not only to help you stay the course, but to call your attention when things have changed enough to merit some potentially profitable changes on your part.

Home

Accesses: