Is the Buy & Hold Stock Strategy Officially Dead
If you hold onto an investment for longer than five days, consider yourself the new millennium's version of Benjamin Graham.
The average holding period for the S&P 500 SPDR (SPY), the ETF which tracks the benchmark for U.S. stocks, is less than five days, according to shocking statistics in analyst Alan Newman's latest Crosscurrents newsletter.
"Given recent average volume, the SPY trades its entire capitalization and then some each and every week," wrote the always-provocative analyst. "Does anyone really wish to argue where valuation might enter the picture in this scenario? Value does not matter in the slightest."
Analysts blame the hot potato market on the disappearance of the individual investor and the entry of the high-frequency trader. After three bear markets in the last decade, individual investors - especially baby boomers careening toward retirement - don't have the risk tolerance to be burned once again.
"True liquidity has not come back and the pros and high frequency traders rule the world," said Brian Stutland of Stutland Volatility Group. "Plus, if the average person ever comes back, then they won't have time to play all day long back and forth in the market. So, maybe buy and hold really is dead."
Newman notes in his newsletter that the average holding period for all stocks was almost four years from 1926 through 1999. After a tech mania, a housing bubble, and the explosion in electronic trading, the average holding period sits at just 3.2 months today.Comment: I'm a "buy and hold" guy. I subscribe to Benjamin Graham's value investing model. I eschew stocks that I don't intend to keep at least (but probably more like 3) 1 year