The long standing passive strategy of buy and hold is a sound investment over time, but is also very susceptible to major losses during volatile market changes. This vulnerability makes the old strategy of buy and hold less appealing when there is no way to predict what the future global market will do as world events manipulate market trends. A better way of investing to avoid these issues is by using the three pronged POD approach as described below.
Passive Buy and Hold
Buying and holding stocks and bonds is important to creating a long-term investment strategy and portfolio. These kinds of investments are usually the companies and products that you will be holding onto for fifteen to twenty years or more allowing them to fully mature and pay dividends over time.
These kinds of investments are vulnerable to sudden market changes, and large market dips as the economy transitions, and world events unfold. That is what makes these kinds of investments more challenging for investors to remain passive and allow the market to stabilize versus selling at the first sign of trouble.
Opportunistic Tactical Asset Allocation
To offset some of the unknowns involved with buy and hold investing you will want to also include the opportunistic tactical asset allocation angle to your investment strategy.
What this does is shift consistently poor return investments into assets that have been performing well so that your assets are allocated in a way that keeps your money working for you at its full potential.
When implementing this strategy you will want to watch the assets that you are considering changing to see that the current trend is not simply a short term fluctuation. This prong of the POD strategy is to help keep your investment portfolio well balanced and provide the investor with potential new opportunities for greater returns should new products or unexpected occurrences impact the market.
Defensive Risk Management
The Defensive Risk Management strategy is an automatic exit plan that provides rules and procedures for exiting investments that are falling so that those funds can be moved over to cash until the market rebounds, or a more fruitful investment opportunity presents itself.
Having an automatic exit strategy allows you to take some risk without being overly vulnerable to large market downturns, by removing yourself from the potential losses when the investment begins its major downward trend, versus leaving your money tied up in these investments for decades waiting for your losses to be recouped.
POD Strategy Investing
The three-pronged approach to POD Strategy investing is meant to provide investors with some sort of control over their investments as global events, environmental occurrences, new technology and industries enter the market, and market fluctuations affect their long-term investment portfolios.
The POD strategy gives investors the ability to make money using the buy and hold method to its full potential, while also providing investors with tools to minimize losses and invest in new products that have the ability to increase the investor’s overall returns.