Buy and hold vs day trading

I see there is quite a lot of "industry experts" coming out and saying how 'buy-and-hold' strategies will never work again and day-trading is suddenly where all the wealth is.

There are a lot of people who got toasted in 2008 while watching day-traders make hay while markets were tumbling. The logical answer is that 'buy and hold' no longer works and day-trading must be the way to go....

1. Most people are not cut out to be day-traders. The risk involved and the control involved to manage your own money makes it a highly stressful environment particularly if you are moving in and out of positions regularly.

2. Not all buy-and-hold investments have been poor. Despite this massive financial crisis, the JSE for instance has largely regained everything it lost over October and November 2008 and the dividends, while reduced, are still largely being paid.

3. Making money and keeping money are two completely different concepts that day-traders don't always focus on. Most day-traders will always tell you how they are making money and coining it in the market but if you had to actually drill down into their results you might find that the statistics tell another story. As I have said before on this blog - the question has to be what do you do once you've actually made a profit ....? Do you just gamble it away on the next trade always upping the risk or money down?

For me the strategy has always been to split the profits up and drop some of them into my bigger equity portfolio which largely does have a "buy-and-hold" theme based mentality. Once it is there I'm not likely to dip into it and I pick up the dividends which are subsequently reinvested.

Some of the other profit goes into expanding some of other business interest so that hopefully by the time retirement rolls around I have multiple sources of income with the outperformance being initially driven by the day-trading.

Conclusion
I read a statistic the other day that South Africa has a negative real savings rate. I knew it was bad but didn't realise it was THAT bad...

I don't think the issue should be about whether it is buy-and-hold vs. day trading but rather building up a strategy that lets you build long term wealth with the profits you can generate from day-trading....

Anyway just a thought - use it don't use it