Your stock portfolio has to fight two major risks, the markets and inflation. Market risk is the chance that the value of your stock will drop. Inflation risk is that your portfolio will not grow fast enough to keep up with rising prices.

To combat these risks, many investors use a “Buy and Hold” approach for reducing market risk. Just how well does the “Buy and Hold” approach work in today’s volatile markets?

If we examine the S&P 500 Index, starting 50 years ago and ending at the end of last year (December 31, 2009) we can observe some very interesting facts:

1) Out of the last 50 years, stocks closed in the red in only 12 of them (less than 25% of the time). The biggest decline came in 2008 when the S&P lost 37%.
2) The worst average return for stocks over any five-year period was a decline of only 6.6%.
3) The worst 10-year return for stocks was 3.4%
4) Over any 15-year period, stocks have never posted an annual gain less than 4.1%.
5) The average annual gain over the entire 50-year period was 9.5%.

These figures are based on the S&P 500 Index. To replicate these returns for yourself you could buy into a mutual fund that invests in the S&P 500 stocks. Don’t forget you have to pay management fees, which could take 1% or more off your return.

The best part is, it takes no time! Just buy and forget for 50 years, and you too should get an average annual return of 9.5%.

One of my favorite things about TradeKing is its free tools for option trading. In the below 16 minute video, I’ll go over a couple of tools and how they can benefit your trading. Even if you don’t have an account at TradeKing, you should watch this video to discover the tools available and how you can use them to make big gains.

Calculating the intrinsic and time value of an option is easy and simple once you know how. Watch this video as I explain how to calculate the intrinsic value, as well as the time value, of a Call option and a Put option.