One of the more common myths perpetuated by Wall Street is that all investors need to do to make money in the stock market is buy. Wall Street pros can produce pretty charts that show that over time, major stock indices like the Dow or the S&P 500 will outperform virtually every other investment.

For an investor with an unlimited time horizon that might be true. But most of us don’t have an indefinite investment period. And what Wall Street pros don’t like to mention is that stocks have a history of producing little or no gains over extended periods.

That is the reason Wall Street pros do exactly the opposite of what they advise ordinary investors to do. These experts tell investors that the best strategy for buying stocks is to purchase index funds and then just hang on to them until they are ready to retire. The rationale is that people will start following this advice in their 20s and their money will accumulate over 45 years or so. This is called “buy and hold” investing.

Unfortunately, most of us either aren’t smart enough to start investing in our 20s or circumstances prevent us from doing so. In fact, I would guess that most Americans really don’t start putting away money for retirement until they are in their 40s. And the bulk of the money they save probably actually accumulates when they are in their 50s.

So what happens when one of those flat market periods coincides with an investor who starts saving the bulk of his retirement when he is in his mid to late 50s?

Let’s look at a chart so you can see exactly what I mean. Below is a chart of the S&P 500 from 1970 until now. I’ve added two red lines to the chart so you can see the type of periods I am referring to.

Notice that an investor who started putting money into the S&P 500 in 1970 would have earned zero return until 1983. We’ve seen a similar situation more recently. An investor who bought the S&P 500 in 1999 did not break even again until 2007. In other words, a 58-year-old who started saving in 1999 hoping to retire in 2007 will instead be working as a Wal-Mart greeter because his investment has not had the type of gains he hoped for.

Wall Street wants investors to focus on that period from 1983 until 1999. Someone who was lucky enough to start their retirement plan in 1983 and then retired in 2000 hit the jackpot. Although there were a couple of blips along the way, that period produced phenomenal market returns. Unfortunately, most of us do not have that kind of perfect timing. And for those of us investing now, economic conditions seem closer to 2000 than to 1983.

To combat these periods of market doldrums, Wall Street pros use a strategy called “active portfolio management.” Instead of buying positions, holding them and hoping they will go up, professional managers move assets from one industry segment to another in an attempt to catch those that are starting an upward move. When the stock market appears to be headed for a correction, active managers will shift assets away from stocks into something safer, such as money market funds or bonds.

So why does Wall Street tell investors to buy and hold rather than to actively manage their investments? Because active management is very difficult to employ successfully. Professional managers are watching the financial markets constantly, using a wide range of sophisticated tools to help them decide when and where to shift assets.

Sometimes it works very well. For example, one of the managers at Strategis Financial Group, Rod Jackson, employs active management for his Focus Growth Strategy. In the early part of 2007, he shifted his allocation from real estate into international funds. In the fall, he shifted again into government bond funds. In contrast to the anemic 2007 return of 4% for the S&P 500, the Focus Growth Strategy returned about 20%. Of course it doesn’t always work that well. Another active management strategy managed by Jackson, Global Tactical Allocation, gained just 6%.

Right now many investors are concerned about the economy. With real estate sagging and the prospect for further market corrections, a professionally managed active management strategy might be a viable option for some investors.

F.S.