In the end, Matt’s point is exactly right: buy-and-hold over decades does work. But the average investor won’t do it. Not anymore. Many investors also can’t do it – some who are closer to retirement age have lost precious time and money in this recession. Buy-and-hold simply will not work for them.
If investors can follow a simple discipline that has a higher probability of success, they’ll be motivated to do it. That’s why we promote the 200-day moving average strategy. It’s easy to implement and simple to track.
It provides sound judgment and rationale for both getting into and getting out of the markets. It gives investors an escape hatch, so they don’t have to watch in panic as their portfolios hemmorhage. It isn’t about trying to call tops or bottoms in the market, or making predictions that never pan out. Decisions made within the plan are based solely on what is actually happening, and nothing else.
The strategy is also easier than ever to put to use: investors have more motivation than ever to take charge of their portfolios. ETFs make it so easy to do, with the transparency they offer, the wide range of access they give to various markets that were once hard to reach and their cost-effectiveness.