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Byline: JONAH KERI
The biggest stock winners in history all have one thing in common: It took a buy-and-hold approach to capture the bulk of their gains. But can buy-and-hold work in a bad market?
It can, but the chances are slim.
In general, three out of four stocks follow the market's lead. That severely limits your stable of possible gainers in a bear market. Even if you find a few stocks that hold up well for a while, that's still not enough. You want to buy and hold only the best of the best.
The biggest difference between bear and bull markets? It might be margin for error. The bull of late 1998 to early 2000 swept a wide range of stocks skyward. A buy-and-hold of great stocks like Cisco and Sun would have netted massive gains. But money losers like Commerce One and Internet Capital Group also racked up big gains.
Try picking flaw-ridden stocks in today's market, and they'll crush your portfolio. A single flaw can sink a promising breakout.
Run through your checklist. Does your stock have stellar sales and earnings growth? Top-notch institutional support? Strong company from industry peers?