Is 'Buy and Hold' Dead?

by: Greg Feirman

It’s a complete rethink of how to do asset management.

- Jeff Seymour, Triangle Wealth Management LLC in Cary, NC, who early last year changed from a buy and hold strategy to holding about 90% of client money in short term bonds, cash and gold and using levered S&P ETFs to trade the market with some of the rest

There’s a seismic change in the market. The people who were buy and hold oriented lost a lot of money, and they don’t want to do it again.

- Will Hepburn, President, National Association of Active Investment Managers

By abandoning time proven techniques, they run a serious risk of destroying their own credibility and their clients’ portfolios.

- Frank Armstrong, President & Founder, Investor Solutions Inc in Miami, FL, who is sticking with buy and hold

You’re paying these people a fee to manage your money - they’re really not earning their keep.

- Jeff Porter of North Canton, OH, who left his buy and hold planner, who hadn’t made a single trade in his account all year, last year for a more active oriented advisor

All quotes from “Advisers Ditch ‘Buy and Hold’ For New Tactics” (subscription required - e-mail me for a link), The Wall Street Journal, B9, April 29

Fascinating article in yesterday’s WSJ about the crisis of confidence in the investment advice business. Investment advisors as a whole have all been taught and grown fat on the ‘buy and hold’ doctrine (see my “The Myth of Buy and Hold”, Top Gun FP, November 13, 2007). That doctrine led them to never expect the kind of decline we’ve seen in the last couple of years - and to hold on through the entire selloff.

As a result, their clients are down big and not happy about it and many advisors are experiencing a crisis of confidence. Everything they’ve been taught and believed has been called into question - and they don’t know what to do.

A growing minority is ditching buy and hold for a variety of alternatives that they hope, emphasis on “hope”, will produce better results. Most are sticking with the conventional dogma.

It must be an empty feeling to realize that you're charged with managing other people’s money but you don’t really know the first thing about how to do it.

Highly recommended article - e-mail me for a link.

Also see: “Atlantic Monthly Cover Story: Why I Fired My Broker”, Top Gun FP, April 23