Buy and hold still? Yes, but recognise the risks ahead

IT has been 10 years since the local stock market hit its low in the aftermath of the US sub-prime crisis that engulfed the country's banking system and spread throughout the world.

It was in March 2009 that the Straits Times Index sank to just below 1,500 on contagion fears that erupted following the bankruptcy of Lehman Brothers. Since then, the STI has enjoyed a steady recovery, more than doubling to its present level of around 3,200. The index is now 17 per cent below its all-time high of 3,876 reached in October 2007 - a post-2009 performance that lends strong support to the adage that buying and holding for the long term to ride out short-term volatility is the best way to invest.

However, given that stocks have turned in such a strong recovery over the past decade, it would be prudent for those who believe in buying and holding to take stock of the current outlook and to recognise the pitfalls which could lie ahead.