Likewise, the buy-and hold strategy doesn’t work. It may have served investors 20 or 30 years ago, but over the last 10 years, the S&P 500 has done absolutely nothing. Will this situation repeat itself? Who knows? The only thing anyone knows for certain is that losing 10 years’ time can be very painful and costly. If an investor were to utilize the buy-and-hold strategy and bought the SPDRS (SPY) in 1999, today he would be in the hole.
For this reason, a tactical strategy might serve most investors better. We watch long-term trend lines to determine where and when we’re in and out of the markets. This strategy is fairly simple to implement and follow – anyone can do it. When an ETF is above its 200 day moving average, a buy signal is indicated and when it falls below the trend line, you sell and stash your money in cash.
As we all know, we don’t know what the future holds and our guess is as good as yours. But one thing is for sure, having a strategy that you stick to and remaining actively involved in managing your portfolio is one way to help yourself become a more successful investor.
Kevin Grewal contributed to this article.