Ask Vendit Off Topic Questions

[Bera]

Getting back to business!

Little discussed is a third scenario: Stocks could witness both powerful rallies and steep declines in the next few years, but with the end result by, say, 2005, being no net gain for buy-and-holders.

That would be a classic "trading-range" market--one in which many stocks bounce around a lot, but don't make much, or any, net progress.

Because the late 1990s were so spectacular on Wall Street, with the blue-chip Standard & Poor's 500 index rising more than 20% a year for five straight years, it's probably hard for many investors to imagine stocks being stuck in a prolonged trading range.

But it has happened before, in varying durations, with the market overall and with plenty of individual stocks. . . .

The worst thing about a trading-range market is that it would leave many investors with two lousy choices: Maintain a buy-and-hold strategy and put up with poor or negative returns for a sustained period, or try to time the market's swings within the trading range, buying more when prices seem low and taking profits when prices seem fair or high.

Many investors, understandably, will reject the idea of wholesale market timing. It's too difficult.

Still, given the experiences of the last few years, at a minimum a trading-range market may demand that investors heed a gut feeling that tells them a particular stock has become overvalued, or that a company's prospects are no longer what they were when the stock was purchased.

Saying goodbye can be painful, but it can be even more painful to stay in an investment whose time has passed.

http://www.latimes.com/business/20010506/t000038150.html

Reid, I think this is a good possibility. Great for position traders. Not so good for buy and hold traders. I know at least one buy and hold investor who reads this thread that should consider the possible down side to that thinking over the next decade!

  
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