Investment maxims: Truths or myths?

On whether the buy and hold investment strategy prevails as the best strategy for investing in the stock market, Associate Dean (Specialised Masters Programmes) of the SMU Lee Kong Chian School of Business and Professor of Finance (Education) Benedict Koh noted that such a strategy is a passive one because transactions are kept to a minimum. "To reduce volatility, investors should buy and hold a diversified portfolio of stocks spread across different industries," he says. Value investors such as Benjamin Graham and his most famous disciple Warren Buffett believe strongly in such an approach. Also, on the “no risk, no gain” strategy, Prof Koh noted that long-term government bonds returned 5.24 per cent a year but had significantly lower volatility (a factor correlated to riskier assets) compared to equities. "This saying describes the trade-off relationship between expected return and risk. It is important to differentiate between expected return and realised return as the trade-off may not hold between realised return and risk for specific trading periods," he added.