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Swing Trading is necessary if you want to manage the risks of the financial markets. Buy and Hold has been widely touted as the most responsible way to invest by financial institutions and even the government. The problem with Buy and Hold is that it can suffer tremendous losses and recovery might be a long time coming; and then you may not have a reasonable return if any. USA Today published an article printed September 27, 2002 that showed the performance of the DOW Jones Industrial Average from 1966 through 1982. In 17 years of ups and downs the DOW only increased from 983 to 991 for a gain of less than 1% in 17 years.
Timing is everything when it comes to financial markets. Consider the graphic below which illustrates the returns of Buy and Hold versus Swingtrading. This example clearly shows that Buying and Holding is not the best way to manage money. Wall Street teaches us that Buy and Hold is the best strategy because you can't time the market. They teach this strategy because it is in their best interest to charge you money for doing little if anything in this "non-strategy". When was the last time your advisor did something other than telling you to buy?
Wall Street brokerage houses and mutual funds want to control your money at all times. Selling stocks when prices go down is not what they are instructed to do, even though it might be in the best interest of the customer. The more assets under management the better for the firm as that is how they are compensated. It's not easy swingtrading, it is work! Buy and Hold is easy, it's no work and most pay someone to do nothing. If nothing else, get a discount broker and buy and hold on your own. At least you won't be insulted by paying someone to do nothing while your money is at risk. Look at the chart below showing the performance of the S&P 500 over the last 5 years. Buying and Holding has been a disaster! Swingtrading at a minimum would have saved you enormous losses and could have made you tremendous profits by going short.
5 year performance of the S&P 500
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