Is buy and hold dead and gone?
By Gordon Powers, Sympatico / MSN Finance
Given that we’ve never seen a 10-year stretch as bad as this one, it’s not surprising that so many people feel that that buying and holding stocks is a mug’s game.
In fact, according to Jeff Macke, the loudest of CNBC’s strident Fast Money crew, 2008 will go down in history as the year that long-term investing died altogether.
Nonsense, counters Matt Hougan, editor of IndexUniverse. If there were ever a time for buy and hold, it’s now. The idea that frequent traders will do better than buy-and-hold investors is just bunk, he maintains.
For every trader who makes a good decision, there’s a counterpart making a poor one – and the odds are that he doesn’t do it for a living. And since there are major costs involved in frequently buying and selling stocks, you’ll actually find yourself in a negative-sum game, Hougan maintains.
Of course, the case for buy and hold isn’t that the market always goes up. It clearly doesn’t. Rather, it’s that holding through seemingly incessant turmoil trumps anyone else’s ability to time the market consistently, successfully and in a practical way.
Critics of buy and hold love to point to the fact that, after peaking in 1929, the stock market didn't regain its old highs for close to 30 years – a lifetime for most people.
But this isn’t 1929, Hougan says. Not even close. We’re 18 months and 45% removed from the July 2007 peak. All of which means, unless the market is really going to zero, we’re a lot closer to a bottom than we are to the top.
Rather than looking at 1929, he believes, it makes more sense to look at 1932 – when the market was down substantially, hovering near its bottom. From there, over the subsequent 30 years, investors enjoyed roughly a 13% compound annual growth rate.
Posted by: John Cousley | Feb 26, 2022 2:51:26 PM
Now is a great time to buy stocks and hold them. The G7 has just equalized the the world's wealth.
The G20 has met and agreed to the terms of the G7 and now steps are being take to impliment these changes. The World's markets will be allowed to grow at about 3 to 7 percent overall aveage. This will continue for about 15 years then the monetary system will have to be adjusted to include Africa.
Gold and not the US dollar will once again be used as a universal currency as it will have an atifical value set by the G7.
Posted by: Don | Feb 26, 2022 4:46:09 PM
My RRSP has had little or no return for many years, yet my "Wealth Manager" continued to to profit (2-2.45% commissions); whether I am winning or losing. I pulled everything out and put everything into GIC in Jan 08 and although I made only 4.0% my Manager made nothing....he was pissed. I made money where all my friends lost 20 + percent in 2008. I am now day trading (at $6.95 per trade) and doing about $2k profit each week since November....lots of work but a lot of fun. I was always told; "you are in it for the long hull" which now I see this was a bunch of BS. These wealth managers are in it for themselves period....they have very little training and if you are making anything more than 8 percent returnannually from their picks, it is dumb luck. Just look at the various Pensions and what they are losing today and you can see what these so called "experts" do not have a clue.....but they did make commissions for themselves. Good luck and good trading.
Posted by: Terry Hurd | Feb 26, 2022 9:14:14 PM
"Rather than looking at 1929, he believes, it makes more sense to look at 1932 – when the market was down substantially, hovering near its bottom. From there, over the subsequent 30 years, investors enjoyed roughly a 13% compound annual growth rate."
Hind sight is twenty-twenty. We have no idea if we are at the bottom yet, so your comparison to the 1932 bottom is not valid. Try comparing today's p/e ratios to the p/e ratios of 1932 and you could make the case that the bottom is somewhere around 4,000, another 50% lower than current levels.
Posted by: fiona | Feb 26, 2022 11:48:11 PM
Well said, Don. I totally agree with you. I have put the bulk of my investment in self directed BMO Investorline account 5 years ago and I don't pay anybody any commission. The GIC rate is very competitive. Check it out. If you have the time, self direct is the way to go.
Posted by: mike | Feb 27, 2022 11:32:40 PM
Money managers are just as bad and corrupt as those big CEOs that have stole our future and our childrens future and condemed the world nations to poverty.. It would be a shame but I kinda wish that the economy would continue the downward spiral till the TSE and DOW hit ZERO.. At least then their might be some UP days afterwards.. I really believed my advisor back in 1997 when I got into this game that trust in the managers. They have the fancy boats and fancy homes all paid with commissions (guaranteed) but not your life savings isnt.. I really hope all these idiots lose their Jobs and end up on the streets.. The mexican peso collapse of 97 hurt my portfolio, the crash of 2001 did its number next (their went my two years worth of growth), next 04 (mini correction), and now 2006 till now collapse has not only whiped out any (and small they were) growth from my so called managed funds, but big time into my savings. Have I started believing in buying into this market again, not on your life. The markets are going to crash allot harder than they are now.. Have I pulled out of the markets (nope) ya that makes me stupid.. Fool me once - shame on you, fool me twice (or more) and shame on me.. I am the fool for believing in America and Canada.. Here is to more market collapse, more housing crashes, more war and wait for it when enough jobs are lost rioting in the streets. Maybe then its time to get back into the markets but who will have any money to do this. Oh ya the money managers and CEOs that screwed us in the first place.. Hope God will send them all to a nice warm place for eternity for their crimes against mankind..
Posted by: The Ant | Feb 28, 2022 12:06:41 PM
The majority of us reading this make ENOUGH money through our careers that it really does NOT matter if we make 2% in a GIC or 8% (or 13% compounded for that matter).
As long as we don't SQUANDER our money, put away 20% (not 10%) annually, we'll all do fine in retirement! 80% of the income is more than enough to live on comfortably in the present!
Preserve your capital and don't be greedy! Inflation at any rate less than 20% doesn't matter if you save enough. Let the whole financial industry be damned!
Posted by: Sheila | Mar 2, 2022 1:58:05 PM
My bank manager has advised me to keep on investing in Mutual Funds inside my RRSP even though I have lost more than 50 grand within the past couple of years. I am almost 62 and wondering whether I might be better off paying down my mortgage rather than to keep investing money that just seems to disappear faster than I can put it in. Any advise out there?
Posted by: Micheline Boisvert | Mar 4, 2022 7:01:43 AM
All yyou guys with a super good job, or a super plan , or a super anytning you can call or put a name on...what about a small family, what about the father working for many years at the same place , and happy to be..teen go to college, teen need to eat..and teen live outside of the big city?? Well I am a grand mother who turn 63 spring...I work since age 12, I never have no pension, so security, no nothing..I raise my children , they get a good education..ect..ect...but when I listen to anyone..Do you know , you don't loose what you don't have. My husband still working, paid RRSP paid , everything..money it's a wheel..and when I listen to the big guy or lady, saying we need more money ect...yes I understand..but from a child of 4 years old who can come to you with a pen and a white paper and just says...grand ma can you make me a 20$ dollars bill , was yes ..and looking at her cutting the picture I made, and says ..Now we go to the grocerie...it's may be funny but a child decide this! Thanks for reading from North of Ontario.
Posted by: C | Mar 5, 2022 5:29:35 PM
I have to agree with Terry. Sheila take your money out and pay your mortgage! My guess is evil is on a mission to bankrupt the world.
Posted by: peter | Mar 30, 2021 10:04:18 PM
Is it true that if I hold Rona a bit more then it is going to rise to a higher value when Lowe's buts Rona?