Baby Boomers - Buy and Hold vs. Buy and Hope vs. Buy and Fold

Baby Boomers you’ve got to know when to buy and hold ‘em and know when to buy and fold ‘em as Kenny Roger’s tells us in his famous song. Most financial advisers will tell you to buy and hold your investments for the long term, as the market always comes back. Well the market will always come back - until it doesn’t. In retirement this should be called buy and hope investing because no one knows if the market will come back the next time or, how long it will take when it does. Markets really don’t care about you or your retirement. In 2000-2003 it didn’t care about those who retired then and suffered up to 40% losses on their nest eggs. So you need to use a Buy and Fold strategy.

Some retirees hung in there and may have got some of their nest egg back in late 2007 only to be hit again by the Sub-Prime fall-out. For many though the pain might have been too great and they would have cashed out losing up to 40% of their nest egg. Many of those people are probably still working today trying to re-build their nest egg, when they should have retired in 2000.

The primary aim for every Baby Boomer in retirement is to protect their nest egg against large losses. So a buy and hold strategy will not work. Stop losses have to be employed to get you out of the markets to protect your capital.

Buy and hold for the long term for a young person makes some sense, but buy and hold for the long term may become buy and hope for retirees, as they run out of money waiting for the market to return. Or they may be forced to sell their investments in depressed markets at fire sale prices just to pay themselves a pension.

So make sure you or your financial planner set stop loss exits on all your risk-based investments to take you out of the markets and avoid large losses. There is nothing wrong with a Buy and Fold strategy if it protects your Nest Egg against large losses in retirement.

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This entry was posted on Thursday, May 1st, 2008 at 4:05 am and is filed under buy and hold. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.