Investors should still use the tried-and-true method of buying and holding stocks, says money manager Jim Oberweis.
Although critics advise investors to shy away from this method, Oberweis says attempting to time the market is still hard.
“Show me some quantitative evidence that someone’s right, and then I’m interested,” Oberweis told the Motley Fool Web site.
“I don’t know anyone who has been able to time short-term fluctuations in the market over long periods of time and make a lot of money doing so. Over a short period of time, it’s extraordinarily difficult — intrinsically impossible — to guess the direction of the market consistently. At the same time, we know that over long periods of time, the market has a propensity to go up in value."
However, Oberweis warned that his strategy doesn’t call for retaining stocks forever.
“You can buy and hold the market forever, but not individual stocks,” he said.
“The individual stocks that comprise the market are businesses, and just like any other business some will succeed, some will fail.”
Oberweis said there also are times when the market becomes too undervalued or overvalued. In March, stocks were undervalued by two or three standard deviations, he said.
“This is a nasty cycle, but it’s not a different game,” Oberweis said.
“If anything, the practices of investing for the long haul are more important now than ever. People run into trouble after a major correction by selling equities. When you have a major correction, that’s the time to increase your exposure to equities because that’s the opportunity to buy stocks at much lower-than-normal prices.”
With the end of the second quarter, stocks aren’t likely to drop if earnings are weaker than estimates, Craig Hodges, president of Dallas-based Hodges Capital Management, told Forbes magazine.
"There is a tremendous amount of money on the sidelines," Hodges said.
"A lot of managers missed this rally. Any selloffs will be met with buying because their job is to put money to work."
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