bricki

Vanguard's Bogle: Buy and Hold Is Alive and Well

Nobody is saying buy and hold just one company like the poor souls who put all their savings in GM bonds did.

Good approaches should recognize when stocks are expensive and when they are cheap and adjust holdings accordingly. I don't think pure asset allocation goes far enough in this regard.

Trend following can be dangerous because it can suck you into bubbles.

On Jun 17 11:37 PM untrusting investor wrote:

> Yes, that's true that buy and hold works if you pick the right ondstocks
> such as JNJ, PG, etc. However how does that work when you pick GM,
> Enron, Worldcom, Citi, or hundreds of similar once high quality stocks?
> Picking all the exact right stocks is easier said than done. For
> example ask some of the GM bondholders who invested most of their
> retirement savings into GM bonds 5-10 years ago for the great yield
> (when GM looked fairly solid) how they like it now.
>
> Personally I think you would do a lot better following major trend
> changes, such as dshort.com shows on his site. Thus getting out of
> stocks when major trends change and getting back in when the major
> trend changes again. Of course you will never catch the exact highs
> nor the exact lows, but you will be in the market for the majority
> of the up move which is what really counts. And just as important,
> be out of the market for the majority of the down move.
>
> And probably just as important is Jeremy Grantham's work which shows
> that it is important to buy stocks when you can get a "great value"
> on them. Such is Buffett's approach as well.
>
> Finally, in my view, if you really want to develop better performance,
> you need to use options as well. Primarily, covered calls and selling
> put options. The premiums you receive can contribute even more than
> dividends to your return.
>
> A simplistic pure buy and hold strategy is thus not all it is cracked
> up to be. If an investor is willing to learn and use other tools
> as well, then they should be able to do much better than just buy
> and hold. But it is time consuming and hard work, so most investors
> probably can't or won't do it. Which is also why most investors really
> don't do very well in the market either.