Notable Quote

We are what we repeatedly do. Excellence, therefore, is not an act but a habit. Aristotle

Is Buy and Hold Investing Dead?

The time for buy and hold investing is dead! At least that’s what its critics say. My response…nonsense. The concept just needs a little clarity of definition and purpose.

Its critics would have you believe that buy and hold is synonymous with “buy and forget about it”.  Any serious investor who subscribes to buy and hold (professional or amateur) would never equate it to buy and forget about it. 

Don’t get hung up on the terminology, “buy and hold”. The philosophy in practice is:

1)      Buy

2)      Monitor Periodically, and

3)      Sell (or adjust) based on some objective criteria.

The critics will have you believe that today’s markets are different and the only way to succeed is by shuffling in and out of assets and whole asset classes. Clearly some things are different today than in 1950. The internet gives us near instantaneous access to information and Wall St. has less patience for a company that misses an earnings target. Nevertheless, we still can’t predict the next market move with certainty much less the date that a bull or bear market will begin or end. 

Next time you hear someone say, “Buy and hold is dead” investigate their frame of reference. Do they come from a position of day trader, T.V. panelist of an options trading show, subscription newsletter editor, or active portfolio manager trying to debunk the value of indexing as a strategy? People in these kinds of roles have a vested interest in trading in and out of stocks (or recommending you do so).

Market volatility has been the fuel for this debate, especially after the market downturns of 2008 and  Q3 of 2011. The fact remains; there is no empirical evidence to show that trading in and out of stocks, bonds, and Funds produces better results than sticking with a disciplined strategy that includes having a reason for buying an asset and criteria for selling it.  The proof is in years of data showing that most mutual fund managers don’t generate better returns over the long term than the benchmark index against which they are measured. Just read the literature from Standard and Poor’s, Ibbotson and Associates, Morningstar and Vanguard, to name a few.

Is buy and hold investing dead…not on your life.

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1 comment to Is Buy and Hold Investing Dead?

  • BIll

    Ron, Glad you took the time to reiterate this point. With all the noisy financial news and volatility, it’s easy to question oneself. We all should remember that Warren Buffet, acclaimed as one of the best investors of all time, is a buy on objective criteria, hold on objective criteria, and sell on objective criteria investor. He keeps many of his holdings for decades. If it’s good enough for him, it should be good enough for the rest of us. You said it best; I’d even bold your point: “a disciplined strategy that includes having a reason for buying an asset and criteria for selling it.”

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