Trend following versus Buy-and-hold
At the end of the day, investors would need to choose between a higher level of wealth or a lower drawdown
“BUY and hold stocks” is probably the most popular investment strategy, preferred by retail investors.
First, it is simple. Second, it generally works as most countries’ stock indexes tend to go up in the exceptionally long term. Third, this strategy has been popularised by academics and investment firms. For instance, Jeremy Siegel’s Stocks for the Long Run is widely considered as the buy-and-hold bible.
In fact, the buy-and-hold investment strategy works very well in a super bull market. However, stocks do not go up forever as they are extremely cyclical. As such, investors will face a huge amount of volatility from time to time.
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