The stock market recently observed two significant anniversaries: the birthday of the current bull market and the high-water mark of the NASDAQ. The two key lessons learned have...
The stock market recently observed two significant anniversaries. March 9 marked the first birthday of the current bull market, which began a year ago when the market turned around from an intraday low of 666 on the S&P500 index. On March 10, the market hit the 10-year anniversary of the bursting of the dot.com bubble, after the NASDAQ hit its all-time high-water mark at 5,132. Ten years later, the tech-heavy NASDAQ still languishes at around 2,300, less than half of its value at its peak.
If there is a lesson to be learned from these anniversaries, say market mavens, it may be that following the crowd can be hazardous to your financial health. If you paid attention to all the Wall Street types who were touting the new financial order back in 1999, you paid dearly when the investors started to impose old-fashioned yardsticks - like profits - on the new-fangled Internet stocks. Similarly, if, as many investors did, you headed for the exits when the market hit its low a year ago you missed out on a 70% run-up in the S&P500.
Many Wall Streeters decided that the buy-and-hold investment strategy was DOA after the market debacle that began in October of 2008. Others, however, point out that the alternative is market timing, where even the best investors find it hard to overcome steep trading costs. From Benjamin Graham to Warren Buffett to Peter Lynch, they say, the successful icons of the investment world make long-term commitments to their investment choices.