Seeking Alpha

Derry Brown

Derry Brown
Send Message
View as an RSS Feed
View Derry Brown's Comments BY TICKER:
Latest  |  Highest rated
  • The Buy-and-Hold versus Trading Decision: Which is the Better Option and Why? [View article]
    Nice article! I would however warn people not to expect 10% return from stocks. As Buffett said in his in his 2007 Berkshire letter:

    ----------

    During the 20th Century, the Dow advanced … 5.3% when compounded annually … Think now about this century. For investors to merely match that 5.3% market-value gain, the Dow … would need to close at about 2,000,000 on December 31, 2099 … While anything is possible, does anyone really believe this is the most likely outcome? … People who expect to earn 10% annually from equities during this century … are implicitly forecasting a level of about 24,000,000 on the Dow by 2100. If your adviser talks to you about double digit returns from equities, explain this math to him … Many helpers are apparently direct descendants of the queen in Alice in Wonderland, who said: “Why, sometimes I’ve believed as many as six impossible things before breakfast.”

    ------------

    Also Robert D. Arnott and Peter L. Bernstein found that the real stock returns over the past 192 years averaged 6.1% derived from three components; an earnings yield of 5%, per capita GDP growth of 1.7%, less 0.6% shrinkage of dividends relative to real per capital GDP growth.
    Sep 18 06:37 PM | Likes Like |Link to Comment
  • Is Buy-and-Hold Dead? Hardly [View article]
    Declan,

    "Finding markets and sectors deep in 'bear market' territory" = Sectors Selection

    "Understanding the cyclical nature of markets" = Market Timing

    "I would look for stocks yielding 5% or higher as a starting point" = Stock Picking

    "Study a simple price chart for each stock" = Technical Analysis

    This is "Hardly" a buy and hold strategy.

    Mutual funds are the ones that sold people on the concept of Buy and Hold because that is how they can collect the most fees. What is even scarier is that those promoting the Buy and Hold approach lead people to believe that an average annual returns of 8+% can be expected over the long term. This is such a half truth it is a lie.

    Market history reveals that success through Buy and Hold occurs only when you are lucky enough to hold during a prolonged period when the market does well. There have been three periods longer than 57 years when the US market has achieved no real growth at all after inflation.

    The Buy and Hold investor thinks that they can’t lose over the long term but not many realize that the long term on the US market historically has been up to 130 years!

    Buy and Hold is the best option for most people, it is a much better option than not investing at all but for the diligent investor it is still far from the best option.

    See how the numbers stack up here – etfhq.com/blog/2010/02.../
    Feb 20 05:49 PM | Likes Like |Link to Comment
  • Buy and Hold Is Alive and Well [View article]
    "But this analysis is sufficient to prove our point that buying and holding a diversified portfolio of 10-15 stocks within different industries will provide long-term investors with a comfortable investment."

    @Pau makes the point I was going to make. You can't randomly select a few stocks that have been around for a few years, show how well they have done and use this as proof that such a strategy will provide a "comfortable investment". If you randomly select a few stocks today, there is no guarantee that they will all be around in 20 years and very likely that several of them won’t.

    @Mr Freddo - Spot on, Buy and Hold is the only sane approach for most investors. That is as long as it is Buy and Hold with an Index Fund or Index ETF. Mutual funds are the ones who have sold people on the concept of Buy and Hold because that is how they can collect the most fees. It is well documented how the majority of Mutual Funds underperform the market benchmarks even before fees.

    @Nick Klein – You say “Buy and Hold has worked brilliantly for decades”. Well the numbers really don’t back up this claim. Market history reveals that success through Buy and Hold occurs only when you are lucky enough to hold during a prolonged period when the market does well. There have been three periods longer than 57 years when the US market has achieved no real growth at all after inflation.

    The Buy and Hold investor thinks that they can’t lose over the long term but not many realize that the long term on the US market historically has been up to 130 years!

    What is even scarier is that those selling the Buy and Hold approach lead people to believe that an average annual return of 8+% can be expected.

    Have a look at the research here – etfhq.com/blog/2010/02.../
    Feb 19 04:54 AM | Likes Like |Link to Comment
  • Does Technical Analysis Work? [View article]
    Your comment that for technical analysis to be valid it has to produce the correct outcome more than 50% of the time is incorrect. If your return when you are right exceeds your losses when you are wrong then you can be right far less then 50% of the time and still be profitable.

    However the long list of successful technical trades, many of which are on the rich list is undeniable proof that technical analysis does work.

    etfhq.com/blog/2010/02.../
    Feb 18 06:43 PM | Likes Like |Link to Comment
  • The Smell of Contagion Hits Wall Street [View article]
    Well done Michael!

    This was a timely, well written article. It has been fascinating to see how contagion and declines have spread around the world just as you predicted.

    www.stock-advice.org/c...
    May 20 08:58 PM | Likes Like |Link to Comment
  • Credit Contagion and the Domino Effect [View article]
    I agree, contagion is a force that people should give far more attention to. It is only going to get stronger over time and deserves more research.

    Derry Brown
    May 20 08:17 PM | Likes Like |Link to Comment
COMMENTS STATS
6 Comments
0 Likes