When an investment article or blog posts starts by attacking the “widely accepted buy-and-hold strategy” it’s usually a good sign that you’re in for some flawed arguments. It’s true that some mutual fund salespeople may try to convince people to buy and hold (with the funds that pay them a commission of course), but in general it’s a good plan.

I’ve noticed several such articles that bring up a good objection though; a lot of people talking about buy-and-hold only focus on the buying side. With all the stories now about people just about to retire who were still depending on short-term stock market returns it might be a good opportunity to reminder investors that they should only hold the investments as long as they match the specific plan and timeframe.

There is occasional commentary on various rules for increasing bond allocation. I’ve always found ideas like allocating your portfolio based on your age to be a bit abitrary and too generalized, but at least it’s a start. A problem with executing strategies like that is that they may assume fairly smooth investment returns. If they’re executed over a short period of time the outcomes will vary a lot depending on when the transition is made. As history shows stock markets can have trends that last a decade or two – a good part of most peoples’ investment timeframe.

If you’re planning to invest in stocks now and fixed income later this would be a good time to think about how you’ll reduce your exposure before it’s too late. Stay tuned for my more unconventional solution 🙂

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