Tag Archives: buy and hold

Fact Sheet

Posted April 6, 2015 by paragon. tags:Tags: , , , , , , , , , , , ,

  • Registered Investment Advisor.
  • Money management has been our primary focus since we began in 1986.
  • Our approach is disciplined yet flexible and evolving.
  • We don’t rely on market forecasts.
  • We use quantitative models to determine which areas of the market are working, where investors are putting money and which areas have the most potential. These models also tell us which areas to avoid.
  • We do not believe in a “buy and hold” approach.
  • We focus on what each market sector is doing now, not what it has done over the past three to five years.
  • We manage-actively, adjust, move, and change our clients’ portfolios, depending on market conditions.
  • Paragon’s principals and employees invest their personal funds in Paragon’s portfolios.
  • We have Fiduciary Responsibility, which means that legally our clients’ needs always come first.
  • We don’t sell financial products or receive commissions.
  • Clients are free to withdraw their money at any time, there are no surrender charges.

Buy And Hold

Posted October 29, 2014 by admin. tags:Tags: , , ,
Old Stock Certificates

I was recently reminded of how much I disagree with the “Buy and Hold” concept of investing. One of our clients, brought in several stock certificates that she inherited from her family. They were dated from 1902 to 1920. That was a period of time when mining companies were very popular with investors. She asked us to research the current value of the certificates.

Her family held several of these certificates for over 100 years. Based on the number of shares and their valuation levels it appeared that some of these stocks had been valuable at one time. Unfortunately, her family had followed the Buy and Hold investment strategy and still continued to hold them.

After some research, it turns out that one company had been sued into oblivion, one morphed into another company and then that new company collapsed, one just disappeared, one went bankrupt and another had financial fraud issues. Bottom line, all of the stocks had gone from being valuable to becoming worthless….over time. They bought and held just like the “experts” told them to.

While this may seem surprising, it really isn’t. Imagine if your relatives in 1920 had the foresight to buy the original 20 stocks that made up the Dow Industrials average and held them until today. You would be very rich, right? Your relatives had bought the largest, highest profile stocks available 94 years ago. Actually, only six stocks (out of the original 20) from the Dow Industrial Average still exist.

If you read our blog, you know that I am not a fan of the Buy and Hold approach to investing. Actually, I get annoyed when I hear financial advisors and the media espousing its virtues. Some advisors support it with such zeal that it almost seems like it is a religious experience for them. I often wonder how many of those advisors actually have their own money invested in a Buy and Hold strategy.

The truth is that Buy and Hold works best sometimes and Active Management works better other times. Different styles of management come in and out of favor over market cycles. The big problem with Buy and Hold is that everything seems great while the market is going up. However, as soon as the market starts going sideways or down, then the Buy and Hold strategy becomes very difficult to stick with. If you cannot stick with your strategy then it is likely that you will never be able to generate good long term returns. If you aren’t going to generate good long term returns, then what is the point of investing?

In both the 2000 and 2008 bear markets, investors who followed a Buy and Hold strategy and invested in the S&P 500 lost roughly 50% of their value during those bear markets. Many found it too difficult to stick with that strategy and sold out of their investments near the bottom of the decline. Many investors never recovered from their extreme losses.

John “Jack” Bogle of Vanguard is one of Buy and Hold’s biggest proponents. It is hard to take him seriously when you understand that he has personally made a fortune pitching the Buy and Hold strategy for years. He is definitely not an impartial voice in the debate.

According to a November 28, 2013, Wall Street Journal article, Jack Bogle is invested in his son’s fund. It is even more interesting when you realize that his son, John Junior, has been managing a fund since 1999 that follows a very active investment strategy that is the polar opposite of Buy and Hold. His fund uses computer models to analyze earnings surprises, relative stock valuations, corporate accounting issues, etc. His strategy is about as far away from a Buy and Hold strategy as you can get. Even more interesting is that Jack (senior), considered the unofficial spokesman of the Buy and Hold movement, is personally invested in his son’s highly “Actively Managed” fund.

If John Bogle senior does not believe in using “Active Strategies”, then why is he personally invested in a fund that follows a very active strategy? Why is he paying higher fees than his index funds charge to invest some of his own money? Interesting….

My belief and experience is that pro-active strategies, such as the ones we follow at Paragon, require a lot more work to execute but provide the highest probability for long term investment success.

As always, if your risk tolerance or investment objectives have changed, please reach out to me or one of the members of our team, and we can discuss any adjustments we need to make to your current plan. We appreciate the confidence that you put in us.

Written by Dave Young, President & Founder of Paragon Wealth Management
Disclaimer
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

Buy and Hold VS Active Money Management

Posted January 27, 2011 by admin. tags:Tags: , , , , , , ,

Paragon Wealth Management’s President, Dave Young, discussed his opinions on buy and hold versus active money management on Paragon TV today with Paragon TV’s host, Randall Paul.

“It has often been said that the wisest investor buys a good stock and holds it,” asked Paul. “Dave, how do you feel about that very broad generalization at Paragon?”

Young said buy and hold is a very simplistic way to invest. He continued to say that he has never trusted the markets enough to put his money in a buy and hold strategy. He calls it buy and hold, hope and pray.vv

“The most difficult part is deciding when to sell,” said Young. “That is the cop out with buy and hold because you buy it, hold it and hope it bgall works out.”

Young said in his mind there are two groups of investors. One group claims that active money management is the only way to invest. The other group believes buy and hold is the best.

“We’ve outperformed the buy and hold strategy over the years at Paragon Wealth Management by being active money managers,” said Young. “There were only four years where our growth portfolio underperformed the S&P 500 out of 13. During those 13 years, our average return in our growth portfolio was 13.34 percent net of fees.”

Young said the reason he is not sold on buy and hold is because he is not willing to just blindly suffer the huge draw downs that an investor can with a buy and hold investment strategy. He prefers active management because it gives him a sense that he has more control in his portfolio to possibly mitigate the downside risk.

Watch the video above to learn more. 

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Any information presented is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. All opinions and estimates constitute the judgement as of the dates indicated and are subject to change without notice. Do not rely upon this information to predict future investment performance or market conditions. This information is not a substitute for consultation with a competent financial, legal, or tax advisor and should only be used in conjunction with his/her advice.

Paragon Wealth Management’s Story

Posted March 18, 2010 by admin. tags:Tags: , ,

The past few months we have been working on some new videos about Paragon Wealth Management to help investors understand who we are and what we are all about. This short video is an introduction our company. It also shares our views on active money management vs. buy and hold. This video was created for our website. If you would like to see steps 1, 2, and 3 mentioned at the end of the video, visit www.paragonwealth.com

Paragon
Wealth Management
is a provider of managed portfolios for
individuals and institutions.  Although the information included in this
report has been obtained from sources Paragon believes to be reliable,
we do not guarantee its accuracy.  All opinions and estimates included
in this report constitute the judgment as of the dates indicated and are
subject to change without notice.  This report is for informational
purposes only and is not intended as an offer or solicitation with
respect to the purchase or sale of any security.  Past performance is
not a guarantee of future results.

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