‘Buy and Hold’ Resources Sector Stock Strategies Don’t Work
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PortfolioDirect
Strategists are constantly searching for high correlation relationships to guide investment decisions but the accompanying chart showing a zero correlation should guide the portfolio construction decisions of all resource sector investors. It shows the correlation in return rankings across all ASX-listed resources stocks in successive years. Cross-year correlations are typically zero. The results for 2015 illustrated in the chart did not differ from the results of prior years published in this January 2015 PortfolioDirect note: (VIEW LINK). If a ‘buy and hold’ strategy added value, relatively high returns in one year would be followed by above average outcomes in subsequent years. In reality, a stock with a return in the bottom 10% has as much chance of a top 10% return in the following year as one from any return decile, including the top 10%. The expected return would be the same whether an investor retained a sample of stocks from among the best or worst performers. Pressures from companies and financial advisers to ‘buy and hold’ and expectations of a progressive value build are all based on a false premise.
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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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![John Robertson](https://assets.livewiremarkets.com/rails/active_storage/representations/proxy/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaHBBWXc9IiwiZXhwIjpudWxsLCJwdXIiOiJibG9iX2lkIn19--c2aa664b1ca2f7744d0c90464e98577955b66fe6/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaDdCem9MWm05eWJXRjBTU0lKYW5CbFp3WTZCa1ZVT2hOeVpYTnBlbVZmZEc5ZlptbHNiRnNIYVFISWFRSEkiLCJleHAiOm51bGwsInB1ciI6InZhcmlhdGlvbiJ9fQ==--a788536266c8d052a67a95e113f2ebbff3ad0a97/f9fff80c906634d4cd45b7e8cf6082d01376379067.png)
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
Expertise
No areas of expertise