Morg

Is Buy-and-Hold Dead? Hardly

For another opinion check this out:

www.investorsinsight.c...

Is Buy-and-Hold Dead? Hardly

Intelligent active management will always beat buy and hold. Hence why my account is down less than 10% for the year while the market is somewhere in the 40% range (depending where you look). The trick is getting out intelligently and unemotionally and getting back in intelligently and unemotionally. I just started putting money back into the market (about 20%) in various assets and if the market continues to improve I will gradually add more (somewhat of a DCA process like Bricki descriped).

The problem is most people (especially amateurs and know nothing do it yourself investors) don't have the time or know how to actively manage there money. This is where buy and hope...I mean hold comes in.

The biggest arguement against buy and hold: After the high of 1929 it took approximately 19 years for the market to return to the same level of value. Anybody want to wait around 19 years to get there money back?

This year the market dropped 40% as I previously pointed out. In order to break even the market must gain a return of +66.67%. If the market continues to return the average 11% it has over the last 30 years then it will take somewhere between 4-6 years of normal compounded returns to get it all back.

On the other hand my 10% loss will require me to gaina mere +11.11%, or a 1 year standard historical market return to get it all back. Even if I sat out or missed the first 20% of market return off the bottom I will still be breakeven or better by the time buy and holders have 25-30% still to recoup.

I of course have no intention of missing the first 20%. Following a very disciplined approach will help me get in at decent prices just like it helped me get out at good ones.

Best of luck to you all who subscribe to buy and hold, but I have feeling I will do much better.