Long-Term Investing Doesn't Work

Today, everywhere I turn in the investment world, someone is asking about the merits of long-term investing. Does it work? Did it ever? Looking over the wreckage of one-time blue chips AIG (NYSE: AIG  ) , Fannie Mae (NYSE: FNM  ) , General Motors, et al, these are natural questions.

For every Danaher (NYSE: DHR  ) , up around 3,000% over the past 20 years, there are plenty of disappointments -- such as Eastman Kodak (NYSE: EK  ) , down nearly 90% over that same time frame.

So which is it? If you buy and hold for 25 years, are you a champ or a chump? If you stick with a stock for five years, are you a star or a sucker?

What do you think? (Drop a comment below!)

Here's what I think.
It makes sense that this debate would rage during the most explosive year in the history of stocks, with the S&P 500 racing to 1,400, buckling to 670, and now settled 'twixt the two. In 2008, on 18 separate days, the index moved more than five percentage points. Damnation!

It took nearly 60 years to rack up the same number of highly volatile days. When decades of tiny waves give way to a single tsunami, you can no longer blindly accept the merits of body surfing. The same goes with long-term investing; we can't help but debate it after a year of calamity.

Now, if you think I'm chalking this up to mere shortsightedness -- a one-year phenomenon -- hold on there. The Motley Fool has been associated with long-term, buy-and-hold investing since our founding in 1993.

And as co-founder and CEO, I'm writing to say that, for many people, long-term investing simply doesn't work. You read that right. Many investors today are wrong to anchor their stocks to an average holding period of three to five years or more.

But now, are you ready to be confused?
All that said, the evidence still shows that multiyear or multidecade holding periods will generate the highest real rates of return, after taxes and the frictional costs of trading.

Lifelong stock investing is the most broadly available way, across the world, to become a millionaire. It's just that most people don't have the time frame, the temperament, or the training to invest this way. Nor do they tack on new capital to their portfolio at lower prices.

Master investor Shelby Davis did. By repeatedly buying and holding stocks forever -- Chubb (NYSE: CB  ) , Aon (NYSE: AOC  ) , and Torchmark (NYSE: TMK  ) among them -- he turned $50,000 into $900 million over a half-century of investing. Against that record, you have reams of statistical data showing that when investors trade their accounts actively, the odds of their losing to the market rise dramatically. Worse still, the likely outcome of their hyperactive trading is that they lose money outright (see Terrance Odean and Brad Barber, "Trading Is Hazardous to Your Wealth").

So what's the average investor to do -- caught between the rock (of not having the time or training to invest prudently for the long haul) and a hard place (of facing insurmountable odds against successful active trading)?

For me, it starts with knowing thyself. You must know the following (the four Ts):

1. Temperament. Can you stomach a 50% loss in the value of your investment portfolio over a two- to three-year period?

2. Time frame. Can you handle 10 years of zero returns from your investments?

3. Training. Are you capable of investing in public companies, diversifying internationally, and understanding what you own?

4. Tacking on. Are you inclined to add new money along the way, particularly as prices fall?

If you can't chant a resounding yes to all four of these, you shouldn't embrace buy-and-hold investing for the long term.

The facts bear out that most people don't demonstrate all four in their investment approach. They can't endure volatility leading to flat returns over any decade. They don't truly understand the businesses in which they've invested or the money managers with whom they've invested. And they are disinclined to add money during bear markets.

They should not buy and hold for the long haul -- period.

It is for these reasons that we launched our Motley Fool Pro service, smack in the middle of the mayhem last fall. Pro has almost never been in the red; it is up 10% today; and it is beating the market by 5.8 percentage points. But how?

The service features buying stocks long, selling stocks short, using exchange-traded funds (ETFs), and deploying options as a conservative hedge. The aim is to:

1. Dramatically reduce volatility.

2. Avoid down years.

3. Protect investors against ignorance, via an open community.

4. Eliminate the need to add new capital each year.

It aims to neutralize the need for a steely temperament, a multidecade time frame, the training to understand each investment, and the necessity of tacking on new capital each month, quarter, or year. This is precisely what must be done by the many investors for whom long-term, buy-and-hold investing simply is not suitable.

The debate
And so as I see it, the debate about long-term investing is actually a poorly framed one. Long-term investing simply doesn't work for many, many investors today. But that doesn't mean it's dead.

For those for whom it does, I expect they'll be enjoying financial freedom measured in quarter-centuries. For those for whom it is not suitable, they must learn diversification and hedging strategies.

We're having a big debate around this question here -- with Fools voicing strong opinions at both ends of the spectrum. Over the coming weeks, we'll be interviewing experts and voicing our own motley opinions. But we also want to know what you think.

So, what do you think? I look forward to reading your opinions and mixing it up with you in the comments area below, Fools!

Tom Gardner is CEO and co-founder of The Motley Fool. Tom does not own shares of any companies mentioned. Read about the Fool's disclosure policy here.


Read/Post Comments (264) | Recommend This Article (194)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 05, 2009, at 3:17 PM, automaticaev wrote:

    to me long term investing is more then 1 quarter and it works.

  • Report this Comment On June 05, 2009, at 3:49 PM, dudemonkey wrote:

    I think this article nailed it on the head. The people who are saying "buy and hold is dead" are people who are not temperamentally suited for it. I don't see any reason to expect that buying great companies at a discount will suddenly stop being extremely profitable.

  • Report this Comment On June 05, 2009, at 4:23 PM, Columbo1 wrote:

    BUY AND HOLD? I saw my Mutual Fund IRA go from $172,000 down to $69,000M BETWEEN JANUARY 2000 AND NOVEMER 2009. THAT BUY AND HOLD SURE WORKED OUT FOR ME.

  • Report this Comment On June 05, 2009, at 4:25 PM, PhilHershberg wrote:

    I don't know.

    IBD this week has Green Mountain Coffe Rosters (GMCR) as its #1 stock and Jinpan (JST) as its #12 stock.

    I bought GMCR eight years ago at $1.30/share (post-split) and it is now $90/share. So I gained $70 for each dollar that I invested.

    I bought JST seven years ago for $2.09/share (post split) and it is now $32/share. So I gained $15 for each dollar invested.

    These are currently my 2 biggest holdings. Please do not tell me that you can't invest and hold and hold and hold. You are 100% wrong!!!

  • Report this Comment On June 05, 2009, at 4:32 PM, automaticaev wrote:

    i bought ire at like 5$ now its like 11.87 and i could use this stock solo for enough margin to day trade and pull out the rest of my equity if i wanted. I dont see myself ever selling my ire holdings unless they are going to crash.

  • Report this Comment On June 05, 2009, at 4:32 PM, z26o wrote:

    How come every article seems to be a sales pitch for one or more of the Fool's premium services? Even as a member of one, I still get a little annoyed at the constant sales pitches. The Fool used to be about good information and strategy. About helping novice investors navigate the perilous waters of investing. What happened?

  • Report this Comment On June 05, 2009, at 4:38 PM, Roxx wrote:

    Buy low and sell high. Add shares when its low and sell shares when its high. Know what happens each quarter and stay abreast of the sector and the competition. In other words, pay attention to your stock, the market and the economy. And when you are wrong, remember to never let a small loss turn into a big one.

    Buffet says, rule number one, dont lose money, rule number two, remember rule number one.

  • Report this Comment On June 05, 2009, at 4:44 PM, brindha wrote:

    I agree with z26o.

    Every article invariably ends with a pitch for their premium service and how great those returns were/are.

    I have been and I am a premium subscriber and

    getting very annoyed at this.

    Overall TMF is turning into a mutual fund type business :(

    P.S - Not all the recommendations in their services are great, they have had many duds including SCSS.

  • Report this Comment On June 05, 2009, at 4:47 PM, BDF958 wrote:

    Buy and hold is not dead, its as relevant as ever. Tthere are three types who say buy and hold is dead 1) Tthose who profit from increased transactions, 2) those who want your $ for their advice and 3) Those who are experts at day trading, because they welcome another fool into the arena who thinks they can be good devoting 6:30-7:30 PM nightly to try to do better than average.

    Now that does not mean that the landscape does not change occasionally, and that you need to live with your picks forever, but we live in a time where "noise" AKA everyone has a voice and really wants us to hear it and this wonderfull thing called the internet enables me to talk to the world, that we must be incredibly selective about what you listnen to, and what you react to and recognize that others will react to dumb stuff, and that will cause short term volatility that will drive a buy and hold nuts.

    Buy and hold cannot be dead because its not a rule but a philosophical idea of owning something you believe in.

    you buy when you believe, you sell when the underlying drivers of what caused you to beleive are no longer true. simple stuff to talk about. Tough to live by. I'm trying.

    I have made some mistakes, essentially forgetting what I just wrote.

  • Report this Comment On June 05, 2009, at 4:47 PM, automaticaev wrote:

    if you want a risky strat with chance for like 200% profit in a year buy tons of ure when it goes to like 3.50 and just hold it.

  • Report this Comment On June 05, 2009, at 4:49 PM, money4eds wrote:

    Simple concept buy and hold. Hard to stay the course unless you understand the company. During down times if your company is still good, buy. The real secret to investment is to lower your risk with continued investment at lower prices. To steal a line, be greedy when others are fearful. Do you homework and know when you need to cut and run.

  • Report this Comment On June 05, 2009, at 4:49 PM, detailoriented wrote:

    I am a novice in this area. Maybe this is the reason I consider long-term investing to be in increments of years versus quarters.

    I believe many Americans have become unable to exercise patience.

  • Report this Comment On June 05, 2009, at 5:04 PM, TMFTomGardner wrote:

    I sense there will be a LOT of comments on my article. I'm going to try to respond to as many as I can. I want to take the edgiest comment first. z26o and brindha, I understand your complaint. You are frustrated to see mentions of membership services in our articles. However, I have to ask that you try to provide an alternate solution. I can give you some important context. Online advertising banners do not get anywhere near covering the cost of articles. Further, the experience of getting whopped in the head at every click by pop-ads isn't a good experience (and also doesn't cover editorial costs). We could, of course, charge for access to Fool.com. But we feel like that's pretty restrictive. So instead, we publish 50-60 free articles per day. And the way we keep them economical is to allow for mentions of our paid membership services -- services which provide 1 free month with no obligation to subscribe. This is our approach to writing as many free articles as possible -- which takes investment talent, research, financial editing, and copyediting. However, to be clear, I am open to your topping our model. One of our core values is continual improvement, and I truly welcome your suggestions. - Tom

  • Report this Comment On June 05, 2009, at 5:04 PM, karnivore wrote:

    I think that if you truly understand the 4 points Tom made then buy and hold and dollar cost averaging is the way to go. For the avg investor, you simply must understand your own time horizon and risk tolerance. I'd also add that you should be comfortable with your portfolio going down by 40% in one day. If you understand that to be a possibility then you will not commit money that you shouldn't.

    The worst thing you can do is say you're a buy and hold investor and then put money in the market that you shouldn't have in the market and then freak out when it goes down and sell at the bottom. And then question the effectiveness of the strategy!?!?

    Nobody ever told you to buy high and sell low.

  • Report this Comment On June 05, 2009, at 5:06 PM, foxxx333 wrote:

    There are times when the market makes corrections, either up or down. The root cause of recent extreme volatility, including overheated runups and roller coaster losses is a sign of political interference in nominally free markets. Current government policy is particularly toxic, leaning heavily toward increased regulation. As investors, we ought to be aware of the degree of regulation and the extent of attempts to control economic outcomes adhering to a politically correct agenda. The idea that a president or any group of his czars can direct the allocation of a nation's resources is without merit. For examples: read Mises' Socialism, published in 1923 wherein he showed that central planners cannot effectively manage an economy. The Soviet Union failed because of its incorrect presumptions, not because those trying to direct its economy were stupid. The Obama administration is leading our economy toward a disastrous discounting of all monetary assets. Be aware. Even in this perilous environment I continue to advocate a long-term view. However, a prudent investor should consider ways to avoid assets denominated in U.S. dollars, and should employ a strategy to minimize dollar-denominated asset losses.

  • Report this Comment On June 05, 2009, at 5:13 PM, texasflyfish wrote:

    A lot of investors don't invest the time to know what they are doing. They are probably better off buying and holding an allocated portfolio of index funds or ETF's. For those with an inclination to learn and the willingness to devote the time, there are better strategies than "buy and hold". Tom Gardner is right: buy and hold is good for some and "dead" for others.

  • Report this Comment On June 05, 2009, at 5:15 PM, TMFTomGardner wrote:

    dudemonkey, thanks for the kind words. The fundamental point here is that there a variety of ways to build wealth. The most important first step is writ on the Delphi Oracle: Know Thyself. The greatest danger periods are when the market is high, and people decide they are long-term investors -- OR -- when the market is low, and people decide they can only make money via market timing and trading. That is reactive and usually leads to plummeting portfolio values. Those who can truly think long term even when -- or particulary when! -- the market has been stomped, are likely to set themselves and their families up for enduring wealth. Those who cannot need to know that they have to deploy diversification and hedging strategies to moderate volatility and manage their temperament. Both approaches are right for the right person and dangerous in the wrong hands. Fool on. -Tom

  • Report this Comment On June 05, 2009, at 5:15 PM, mikeinmadrid wrote:

    How is your long-term investment in Amex doing Tom?

    TMF are motivated to get people to buy the stocks they recommend. That way TMF sell more subscriptions. If you don't buy what they recommend you are unlikely to renew your subscription. TMF have a powerful incentive NOT to ever recommend selling a stock.

  • Report this Comment On June 05, 2009, at 5:21 PM, wuff3t wrote:

    dudemonkey - you are spot on. The number of people who complain about TMF's approach and then, as evidence, cite that they bought a recommendation last month and have seen it drop 30% since then, is astonishing. How can you criticise a "long-term" approach after only a few weeks? And yet people do it.

    TomG - it's good to see you entering into debate with people who comment, but I have to say many of the complaints are pretty weak anyway. There is a wealth of free information - including multiple individual investment ideas - on the site every day, so to complain that there's a sales pitch at the bottom of many articles is a bit silly. No-one is being forced to buy anything, and it only takes a few seconds to read the pitch and decide you're not interested. I really don't understand what people are so upset about.

  • Report this Comment On June 05, 2009, at 5:22 PM, Netteligent09 wrote:

    Like gambling in Las Vegas, dealer is the only winner in a long run. I am a very conservative and hope to build nest egg with major companies. Social Security will not be around when I retire. Long term investment is dead in 2009. My investment almost wipe out. My 401K is almost wipe out. My mutual fund is gone. Last time I checked, college saving for my daughters lost almost 65%.

    Long term investment is Death...and taking half of my soul with it. Now I am for myself.

  • Report this Comment On June 05, 2009, at 5:25 PM, TMFTomGardner wrote:

    foxxx333, I have studied at the altar of Von Mises, the Cato Institute, free market free thinking libertarianism. And I have come back from that journey believing that it is a great way to protest unnecessary rules, but that it is not a great way to set up an enduring market system. There need to be rules. Period. You cannot allow a banker to simply lift deposits, scamper to Bimini, and cry out, "Caveat emptor, baby!" We need stop signs and speed limits and speed bumps in the school zones of the financial marketplace. I think you are right in being worried about over-regulation. It's a terrible thing if you put a speed bump on the LA freeway. It's also bad news to put a stop sign every 18 feet. But particularly in recent history, the political push -- backed/fueled aggressively by lobbying money -- stripped the markets of fundamental and crucial rules. All of a sudden, when a player was on the way to an open layup, you were allowed to hit him with a tire iron. And that destroyed the merits of the game. Our financial markets are game-like; sure, it's quite a serious game; but that game needs rules. I am not as concerned as you are about the Obama administration (although I do have serious reservations about a UAW bailout of sorts, but that's an article for another time). I think we need to put rules of fair play back in place. I'm expecting them to put a few too many stop signs down and to bring the speed limit down too much, initially. But I also believe it'll settle back to the proper place, where merit is rewarded, fair play is the norm, and our markets function. I don't agree with you that the market crumbling has come because of too many rules or the threat of too many. That said, I enjoy the discussion. Thanks for posting.

  • Report this Comment On June 05, 2009, at 5:30 PM, mikeinmadrid wrote:
  • Report this Comment On June 05, 2009, at 5:39 PM, TexasMunch wrote:

    For over a decade, I've sold mutual funds, annuities, and variable products to clients and preached "long-term" investing as the only way to achieve financial freedom. In fact, I've written three books about financial planning including my favorite: Make Your Money Count. In 2008, I surrendered my securities license for one simple reason: the system is broken.

    The first line of my first book: "Trust is what matters most in any relationship". The "system" is broken - from government to corporate boardrooms (the institutional church is another story, but the disintegration of the mega-church will speak for itself so I'll save my sermon on that "system").

    At the end of the day, doing your own fundamental analysis (some technical analysis is also vital with the massive increase in the number of global individual investors like me and other Fools who are paying attention to price fluctuations via powerful tools, technology, and other Foolish means).

    All I know, I learned the hard way. I'm 47 and I'm thankful to take my lessons learned and play by new rules. Every American needs to learn more, grow more, and apply more wisdom if we want to actually achieve some form of financial freedom. Taxes, inflation, long-term illness, and the cost of rehab also have to be factored into future "emergency funds".

    Or, we can hope for recovery like the US Congress does. The only problem (President Obama) is that hope is not a plan...

    Thanks for opening the dialogue.

  • Report this Comment On June 05, 2009, at 5:41 PM, jirvin87 wrote:

    I believe that the buy and hold strategy works, but you have to know other investing strategies as well. I feel bad for the COLUMBO1, a decrease in my IRA like that would make me feel the same about this long term investment strategy. However, even if you do have an IRA and have been using the long term investment strategy one should also practice the diversification rule of finance. Not to say COLUMBO1 put all his eggs in one basket, but IRA's are somewhat unstable, and it also depends on the kind of IRA you decide to invest in. Keeping a good lump sum of your money in a regular interest baring savings account can help protect your assets from times like this. I believe to become a long term investor one has to be able to analyze and somewhat predict the market the best they can. There is always a balance in life and your investments will survive if you balance them correctly.

  • Report this Comment On June 05, 2009, at 5:41 PM, TMFTomGardner wrote:

    One of the really fascinating things about investing comes in the form of the different outcomes and stories that emerge from it. You have Columbo1 and Netteligent09 sharing their very discouraging results. And these aren't necessarily short-term perspectives. Columbo offers that over the last 7 years, he is down about 60% and has lost more than $100,000. And these aren't flukes. Did you read Anand Chokkavelu's article "Bargains for the Next 10 Years", published on May 28, 2009. Stocks like Campbell Soup, Comcast, Merck, Verizon et al...they're down 40-70%...SINCE 1999. That is really tough for someone in their 60s to handle. Tough.

    But against that, you have PhilHershberg sharing one stock after another that he's purchased and held for a long-time, enjoying multi-bagger returns. Most of the comments in the chain right now support long-term investing.

    The difficulty here is that we have just seen again that you can get 10 years of stock market returns that yield nothing. Zilch. The chances of that happening over the next 10 years is so very low. But we are trying to build investment models that meet investors on their terms. This is why you see from us a number of long-only, buy-to-hold investment services, designed to help people find the right companies to own indefinitely. And we certainly make mistakes. mikeinmadrid points that out. What I can assure you of is that our investment approaches are not dictated by the commercial business of membership. It's simply that these services are designed for people like PhilHershberg et al, who are looking to build a stock portfolio over their lifetime -- able to manage their temperament, to know their timeline, who have trained themselves or been trained to think this way, and who tack new money on when prices are lower.

    For those who are not able by temperament, age, gameplan, experience, and income generation able to follow that approach...services like TMF Pro (and I expect we'll add a few more) are designed to help you force down volatility, moderating both the upside and downside, and positioning members for a steadier path to wealth.

    Again, it all begins with really knowing thyself. Fool on.

  • Report this Comment On June 05, 2009, at 5:42 PM, Kangman wrote:

    I've been a Stock Advisor subscriber for 1 1/2 years and have enjoyed the service. I have bought some of the recommendations, but not all. I have also bought other stocks, some okay, some terrible. I started buying at the peak of the market, 14000 or so, and have watched it slide since, buying the whole time. However, I have ramped up my buying in the last 1/2 year, and almost gained back what I lost. My biggest problem is that I don't have enough time to research the companies that I buy. Am I completely Foolish to rely on MF for my research? I love investing in individual stocks because it certainly makes it a lot more fun.

  • Report this Comment On June 05, 2009, at 5:45 PM, harry1n wrote:

    In my opinion, the buy and hold days are over. That does not mean you should become a day trader, but modern technology is changing so fast that the probability that any one company is going to be the top dog forever is very low. I now set stop losses on every stock I buy and if it drops significantly it automatically sells. If it turns out I should have kept the stock, I can buy it back again for $7 on many on line sites. I will never again let my portfolio drop significantly based on predictions from so called stock experts, that on reality don't know any more than I do.

  • Report this Comment On June 05, 2009, at 5:54 PM, TMFTomGardner wrote:

    harry1n, thanks for the comment. I understand your point. But I do wonder -- is it possible you might have said the same thing in 1974 or 1933? We saw the same decline in the value of American businesses then. And I suspect it would've been easy to say -- aw heck, the world has changed; things are moving faster than ever before; etc. I ask this because I don't detect a change in Mr. Buffett's philosophy. What I heard throughout the downturn is that he was growing increasingly delighted as an investor -- though he was having work extremely hard as an overseeing consultative force on the operations of his subsidiaries. But he did not say that long-term investing just won't work because there are no holdable moats left. What I suspect he does think is that we overrate brands, overrate competitive advantages, and oversimplify in a favorable way our view of the companies we own. It is true they are forever being challenged. And there are few truly indefensible businesses. But I still seeing him looking for 10-year buy and holds, casting somewhat of a blind eye on yearly stock price twitches. I wonder, then, if it's the market that has changed forever...or your willingness to accept the volatility of major cycle moves. Just something to ponder. Thanks for posting, Fool. -Tom

  • Report this Comment On June 05, 2009, at 5:55 PM, bradbunt wrote:

    Buy and Hold - is for short term. If you see a big run up in a stock. Sell a little, if it doubles after that, sell a little more. Buy and sell but never get too greedy. No buy and hold doesn't work anymore unless you have someone who is tracking your stock everyday and can tell when the run is over or the company is bust. Your broker will not tell you or know.

  • Report this Comment On June 05, 2009, at 6:01 PM, mikeinmadrid wrote:

    Tom wrote:

    What I can assure you of is that our investment approaches are not dictated by the commercial business of membership.

    Perhaps not explicitly. I'm sure Tom doesn't bang on desk telling his analysts to drive membership sales. But the TMF analysts know which side their bread is buttered. TMF analysts are all competing against each other for their own stock recommendations to be bought by as many subscribers as possible. The commercial imperative is always there. Any adviser is trying to make himself money first (or keep his/her job) and possibly the client second. Every bear market TMF 'start again' and rejig their services. Tom is not invested in the stock market. He is invested the Motley Fool.

  • Report this Comment On June 05, 2009, at 6:11 PM, stockgeek54321 wrote:

    The key to very successful investing is very very simple. Buy good simple companies with sustainable competitives advantage and hold on to them for a long time. If the price drops, then buy even more, provided the advantage still exists and the price is reasonable.

    For example. If you had put $5000 in JNJ in 1943 and reinvested all the dividends, you would be sitting on $120,000,000 right now. But i'm sure during this time, there many times periods when the price of JNJ by a signficant amount, even as much as 50%. What if you had sold out during those periods.

  • Report this Comment On June 05, 2009, at 6:13 PM, Ruhaan wrote:

    Kudos to you. A Great Article and worthwhile point to debate about. I would just bring one caveat to attention. Buy and Hold does not mean sleep while driving. Keep your eyes and ears open. Who did not know GM has been losing market share over the last decade. Most people were talking about the tough time company will have to face and the difficulty it was having to turn profit each year..

    So Buy and Hold has a place. However, its very very very difficult to be patient.....

  • Report this Comment On June 05, 2009, at 6:23 PM, dohmama wrote:

    I, too, have noticed the frequency with which TMF promotes its (expensive) membership services. I am sincerely curious to know how effective these promotions are. How much more effective is it to promote memberships daily as opposed to, say, once or twice a month?

    This is such an interesting topic: "Buy and Hold" has been such a mantra for so long. I confess I am reluctant to sink any more of my shrinking funds in the market, yet the alternatives don't convince me either.

    For now, I am pretty much wringing my hands and wondering when things are going to seriously improve.

  • Report this Comment On June 05, 2009, at 6:38 PM, chantillydude wrote:

    In 2007 & 2008 I had subscribed to several MF publications and subscribed to much of the philosophy that was expounded on value, knowledge, the power of small cap stocks in building wealth. In late 2007 I concluded that macro-data and a large number of thoughtful articles on derivatives and risk pointed to the possible collapse of our financial system. I posted several long and brief comments on your boards saying so and was laughed out by several of your folks with MFnames. I moved my money, my wife's money, and my (employed) daughter's money to T-bills. The only value (not money) we've lost since Thanksgiving of 2007 is a small portfolio of MF recommendations that I own in a separate investment account........ Natus Medical, Ctrip.com, Exelixis, Akamai, and Copart. I sold the Microsoft!

    Now you want to turn from your long term philosophy and say it was all wrong, heresy. Why would I want to take your advice or subscribe again to your publications? Why would I want to trust your judgement anymore than that of some stockbroker or commission-based financial advisor?

  • Report this Comment On June 05, 2009, at 6:38 PM, bernbern0 wrote:

    Great food for thought from many of you (most of all Tom G) and I thank you for it. For the most part, I have been a long term buy and holder in a self-directed IRA with my dividends re-invested..But over the years I have taken profits (and losses) from time to time and shifted assets to other stocks or funds. When IBM was going down the tubes many years ago, I bravely slowly bought 600 shares for a cost of $39,000. Continuing to re-invest dividends, at one point I sold about $40,000, a little more than my original cost. A couple of months ago I finally gave in and sold my complete position when IBM was around 94, for about $234,000 dollars because I was beginning to think this buy and hold stuff is no longer good. Guess what? IBM reached a high of about 108 recently. Am sorry I sold? No. But buy and hold does work if you have patience, and of course, the right investment.

  • Report this Comment On June 05, 2009, at 6:44 PM, portefeuille wrote:

    have a look at the results of the "caps" game:

    http://caps.fool.com/Stats.aspx?sortcol=5&sortdir=1&...

  • Report this Comment On June 05, 2009, at 6:48 PM, portefeuille wrote:

    somewhat more relevant is this ordering:

    http://caps.fool.com/Stats.aspx?sortcol=4&sortdir=1&...

  • Report this Comment On June 05, 2009, at 6:51 PM, exotec wrote:

    Take a look at BDSI the FDA decision for a new formula medication by 15 june is for a re-submission made in last august. It should hit the 12$ next two weeks.

    Dont miss it. You dont believe that ? just check everyday how its growing.

  • Report this Comment On June 05, 2009, at 6:54 PM, gaswelldealer wrote:

    we are all different like snowflakes, some do have what it takes to play longterm. most appear not to..

    what has historicaly worked best will probably continue to do the same.. although i havent sold a stock in years I have lost some>> Budwiser comes to mind...OOOps lost the stock got the money.. Halliburton i sold on the upside of the last cycle but bought again trippiling the shares i sold and pocketing the difference.. A pure, pure, PURE! buy and hold is an oxymoron... cant have a profit until you sell and we are all in this to make money, i hope? if i had the time i would day trade with 10 % of my holdings and 3-10 year hold the rest for the deep cycles... guess im like most a mix who tries to do his homework

  • Report this Comment On June 05, 2009, at 7:02 PM, portefeuille wrote:

    we are all different like snowflakes, some do have what it takes to play longterm. most appear not to..

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

    and some don't want to ...

  • Report this Comment On June 05, 2009, at 7:11 PM, halomaster wrote:

    The key to this debate goes back to what it means to buy stock. When you buy shares of a company you become an owner.

    The problem is that most people know that definition, but don't actually acknowledge it. If you acknowledge that definition you realize that the key to stocks is owning good businesses. That is investing in its pure and simplest form. In other words, focus on what the business is doing and not on what the stock price is doing. Add to that the knowledge of how to value businesses and you have what it takes to conquer the stock market.

  • Report this Comment On June 05, 2009, at 7:11 PM, bobtoni wrote:

    I look at buy and hold as President Reagen looked upon deals with the Russians. "Trust but verify".

    In other words, buy and hold as long as the companies you own are "still" a good investment. It requires careful watching and analysis and I don't think you should marry a stock. Some of them will ultimately betray you!

  • Report this Comment On June 05, 2009, at 7:47 PM, JustMee01 wrote:

    People forget several aspects of buy and hold.

    Buy and hold needs to be used in value situations. You can't buy a commodity stock on the run up and expect to hold it long term. You can't buy a cyclical and expect to hold it long term. By the same token, you can't buy a mid-cap growth stock at 50 times earnings and expect to buy and hold. If the market turns, you'll get trampled, and at high valuations spectacular performance is priced into the purchase.

    On the other hand if you buy a company with little debt, good cash flows, and a historically strong dividend record at a reasonable price, you can expect to hold long term until those fundamentals change. Buy and hold doesn't apply to speculative purchases.

    People also tend to look at their patience with their funds and ignore the behavior of their fund manager. They may be "buy and hold forever patient" but their fund manager may not be. He's buying. He's selling. It's his strategy that you're using. So, buy and hold just doesn't necessarilly fit with mutual funds either.

  • Report this Comment On June 05, 2009, at 7:48 PM, KalerSimth wrote:

    Do you remember MATT has said this:" Clean or not, coal is still the dominant source of electricity in the U.S. and around the world, and that promises to keep coal miners like Peabody Energy (NYSE: BTU) and Arch Coal (NYSE: ACI) with plenty to do. Of course, it would be tough for Peabody or Arch to do too much of anything without the machinery made by Joy Global's subsidiaries -- Joy Mining Machinery and P&H Mining Equipment." http://top5stocks.blogspot.com

  • Report this Comment On June 05, 2009, at 7:50 PM, RADARTHREE wrote:

    This is NOT an 'article'. It is a cleverly disguised sales pitch. It IS annoying and I wish that TMF would realize this. It must be working though, as evidence I point to how many of these pitches there are...

  • Report this Comment On June 05, 2009, at 8:08 PM, MKArch wrote:

    Tom,

    I am a big time Bill Mann fan and learned a lot from him while he was an advisor on H.G. One point he made early on in the current melt down that I agreed with at the time but now question was that he does not spend a lot of time on the macro economy he focuses on individual businesses. I've been thinking about this recently and my belief is that if you don't consider the macro economy you are by default assuming there is some norm that I don't think exists anymore.

    I'm not sure exactly how to explain it but it seems to me that the rise of the information age has made it harder for companies to maintain moats. The rise of emerging markets has increased competition (often supported by governments motivated by concerns other than profitability and fair competition). The rise of low cost brokerages that lead to widespread participation in the stock market by investors more focused on *now* has put more pressure on companies to max. out short term results. I think when you put all of this together you get an environment where it's just harder for companies to maintain a moat or put long term concerns over short term profits than maybe it used to be and investors need to be looking over their shoulders more than they used to need to.

    I still believe trying to buy strong businesses at compelling prices and holding as long as the story does not change is the way to go but I think these days you need to be more concerned about who or what might be coming down the road and maybe a little more ready to not assume there is a norm that will prevail. It looks like change is the new norm and it's going to be tougher to find companies you can hold for decades although that's the goal.

    Mike

  • Report this Comment On June 05, 2009, at 8:10 PM, cwalthers wrote:

    For the last 7 or 8 years out of the 10 that I've been invested personally in the stock market, I had come to the conclusion, back then and still today, that the "investors", the word used in newspaper articles when describing the market behavior - up/down, are basically "manic depressives": no one sees any thing through, no matter how little the "glitch". Now, as I understand it, the trend is to "buy/sell", sell/buy"; a stock goes up a couple of dollars, sell. A stock goes down a couple of dollars, buy. How does one deal with that over the long term except to do the same, perhaps? Dianne in VT.

  • Report this Comment On June 05, 2009, at 8:16 PM, Barebonez wrote:

    gaswelldealer makes a good point

    i agree with his goal to allocate certain % to your Long

    stocks, just as you would set a % to your high risk/ low risk stocks / etc

    i am going long with Ford but it is dips i am selling off

    and re-acquiring on the up-trend. in affect shorting because i want to hold the stock but also i can increase my holding

    works for me

  • Report this Comment On June 05, 2009, at 9:09 PM, FlorisHJ wrote:

    Here's my approach to timing:

    I BUY when I believe a company is good value. If the share price goes down, but your fundamental expectations haven't changed, you should like it more - and buy more. On the other hand, if you think a company is in trouble (market changing, model changing) then dump it - whether at a profit or a loss.

    My second rule - when I don't understand why my stock has gone up so much (as I did last year when AAPL went to 180+), I sell it. Turns out that was a good idea - I bought it back below 100, when I once again thought it was good value.

    So don't blindly ride the long term -- THINK. I think that one T can replace Tom's 4 T's...

    By the way - I am a Fool Pro subscriber and their advice has netted me many times my subscription - both the actual trades they suggested, and a few "copycat ideas" of my own that were inspired by what I learnt from them.

    Good luck to you all.

  • Report this Comment On June 05, 2009, at 10:05 PM, StockTradingFool wrote:

    Long-term investing is an awesome strategy as long as you remember these basics: you purchase shares of stock in great companies at good values, and you retain them (or add to them) as long as those companies continue to remain great. When a company becomes mediocre, it's time to sell... whether you've held its stock for 30 days or 30 years.

  • Report this Comment On June 05, 2009, at 10:15 PM, portefeuille wrote:

    I BUY when I believe a company is good value. If the share price goes down, but your fundamental expectations haven't changed, you should like it more - and buy more.

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

    see this video: http://www.bengrahaminvesting.ca/Resources/Video_Presentatio.... (klarman on that)

  • Report this Comment On June 05, 2009, at 10:35 PM, RunFin wrote:

    Great debate!!! I love the "we are all different like snowflakes."

    Buy and hold? I am running two portfolios for myself. (I fired my full-service broker and opened an online account with one of the brokers at the bottom of this page. I trade for $9.99 a pop.)

    I have a roll-over IRA, my long term portfolio. Second, I allocated a portion of my savings into a brokerage account. I buy and sell frequently in that account because I don't want to lose any money. Both strategies have worked very well because I set a sell/stop on each position. My stops are much wider on the IRA account and the turnover is much less in this account. In this volitile market that has worked well.

    I set stops very tight in the brokerage account. It is maddening when the stop executes and then the stock runs up. But I haven't lost money. Honestly, it is a lot of work and as long as I am engaged I make money.

    As for sales pitches, I skip them. I subscribe to two newsletters and the ideas that I have gotten from them have made me lots of money. The HG portfolio is the coolest idea ever. I am taking many ideas and implemnting a few of them in my "long" portfolio. When I lose money based on my decision to take a position, it is my fault. I don't "follow" someone's recomendation. If an investor doesn't have the time to do the work themselves, which is fine and most people fall into that category, then they should invest in mutual funds and hope for the best. If you want to invest, then you need to do the work yourself. TMF or any other similar service is only there to give you ideas. What do you expect from a $200 / year newsletter? My $350 investment in TMF services has paid helped me enourmosly.

    p.s. I lost a ton in the tech stock bubble of 2001 - 2002 and I learned a bit from that. This crisis has been different for me and I used the volitility to my advantage.

  • Report this Comment On June 05, 2009, at 10:48 PM, dgmennie wrote:

    The problem with buy-and-hold is twofold and getting worse, not better:

    (1) For MOST INVESTORS it is impossible to tell what is a good buy and what is not. There is simply too much information available, masking what nuggets may be particularly significant. Yes some investors will find and act on the critical data some of the time. So what? Some gamblers win the progressive slots despite the odds. Does this mean YOU will?

    (2) For MOST INVESTORS there is a very real timeline within which they MUST make the nut or the investment strategy (even if eventually successful) is irrelevant. Your life is very finite, as are the lives of those you love. The idea that you will have 20 to 50 years to "manage" a growing portfolio of investments is mostly nonsense as personal emergencies and disasters (never mind the global and economic ones you have no control over) will eventually derail your best investment intentions.

    You might also consider simply looking through an old LIFE magazine from the 1950sor 1960s the next time you find one at a yard sale. Examine carefully all the ads from big, well-known companies that no longer exist. This should give pause as you enthusiastically buy up today's blue chips. It is MOST UNLIKELY they will still be here many years down the road when you want to retire. What does this say about buy-and-hold?

    You do not need a mathmatical algorithm or an advanced degree in economics to understand what is going on here. But you do need insight well beyond what is offered in the popular press (or online) about investments to succeed and prosper.

    Good luck!

  • Report this Comment On June 05, 2009, at 10:55 PM, stan8331 wrote:

    My approach is more or less a buy and hold type of strategy, but it's an inescapable fact that the economic landscape can change far more frequently than in the past. Anyone who's unwilling or unable to adjust on the fly is likely to see their returns suffer.

    There are some limited situations where hedging strategies can make sense for me as an individual investor, but my general inclination is to avoid them whenever possible. Finding good companies and keeping my portfolio adjusted for shifting conditions is really enough of a challenge for me. When you add in numerous other types of investments, the overall complexity of investing increases exponentially, as does my disadvantage versus full-time investment professionals.

    It's possible that Motley Fool Pro could help counter-balance that disadvantage to a degree, but at this point it's not a cost-effective option for me to even consider. The majority of my investment funds are tied up in an employer-based retirement account that only offers a very limited selection of mutual funds. I only started investing in individual stocks last year, and those funds are not yet large.

  • Report this Comment On June 05, 2009, at 11:36 PM, ReadEmAnWeep wrote:

    Idk if that makes sense. I realize that it is the co-founder writing it (and the co-author of my favorite investing books). But doesn't this go against everything said in their books? I thought the idea was the buy and hold was the only way to invest and make money for the average joe who also needs to work a job.

  • Report this Comment On June 05, 2009, at 11:38 PM, Vassilopoulos wrote:

    Interesting...

    I have found that the best fool to listen to is myself.

  • Report this Comment On June 05, 2009, at 11:45 PM, SintUniversal wrote:

    Buy and hold, long term investment. This sounds simple, in reality no. Dow Jones components consist of top companies. Just last week, Citicorp and AMEX were dropped. It matters a lot what companies do you buy. Johnson & Johnson, Coca-Cola probably are worth holding long. But again no guarantee, with modern advertisement and brand marketing, invincible products can be replaced by younger generation. Can anyone still recall the famous Green Spot and Bailey orange drinks? Not to mention GM, Chrysler cars.

    How long is long for investment? In average, if we start to be investment active since 20 and decide to live without stress at 70, then 50 years is the maximum. If you bought Microsoft IPO, then it was a great buy and hold until year 2000. But Microsoft now have so many competitors, they can disappear too, just like Nortel, once the biggest company in Canada with 35% share of the Canadian stock exchange.

  • Report this Comment On June 05, 2009, at 11:45 PM, fullmoonchaser wrote:

    I have a comment for Columbo1 --- Exactly what is your basis (amount that you have contributed) in your IRA?? Since IRA'S have been in existence for 34 years now (1975 was the first year that a person could contribute to one) and the contribution limit for most of that time was $2000, it looks to me that if you started your IRA then, you should be about even right now considering that not all of your IRA money should have been invested in your mutual fund... If you were diversified as most retirement planners suggest, then it looks to me that you still have a profit in that account. So, if you have time, buy and hold (or at least hold) might still be a viable option, since the market seems to be making a few slight gains...

  • Report this Comment On June 06, 2009, at 12:20 AM, papaegan wrote:

    The 'Fool' has helped me along the way. I've enjoyed researching the companies I've put my money behind. And it's been said many times that companies paying dividends usually seem to come through (since I reinvest the dividend stocks have helped to offset some of my losses). That's not to say I'm holding onto losers. This has been a great read for me - thank you all -

    I hope we all can benefit from each other's knowledge and prosper.

  • Report this Comment On June 06, 2009, at 1:20 AM, robstuck wrote:

    people, the motley fool is a great place for getting information about equities, sharing ideas, and playing fantasy games. however, THEY MAKE THEIR MONEY FROM YOU BY SELLING STOCK IDEAS. If you buy and hold they can't make money. buy and hold is the best way to make money in the stock market.

  • Report this Comment On June 06, 2009, at 1:43 AM, karensboyfriend wrote:

    I haven't made money following tmf recommendations,however I do sense Tom's integrity. The price of the subscriptions compared to what I have learned at tmf is miniscule.The tmf for me has been an incredible resource if I never purchase one recommendation. The U.S. markets right now are way to manipulated[great comments foxxx333] . If I hadn't found tmf I would probably still watch Cramer, whew. If the price of a subscrition at tmf seems like too much money, you probably shouldn't be investing in the stock market. I agree with 333, move your money out of US$ assets. good luck to all who didn't cause this!

  • Report this Comment On June 06, 2009, at 2:46 AM, joandrose wrote:

    The world has changed over the years . Investment strategies which were appropriate in the past may not apply now . I personally am not interested in what a company did 5 or more years ago. - I am now looking at shorter time frames of up to 3 years. World affairs and markets are more dynamic now than in the past and investors need to adapt their moves. The makeup of your portfolio is much more critical now . Never fall in love with any investment - cut your losses when neccessary . After you have done your homework go for your top choices - don't add in also rans - I make no more than maximum10 best bets - prefer 6 or 7 to hang my hat on !

  • Report this Comment On June 06, 2009, at 3:52 AM, billcarr wrote:

    It is perhaps reasonable if you are young and in steady secure jobs (not many of those today)

    but if you are old and retired it obviously does not work.

    I cannot wait 25 years or even ten years for returns

  • Report this Comment On June 06, 2009, at 6:41 AM, RGGrass wrote:

    In 1994 Kevin Phillips wrote a book named Arrogant Capital.

    He talked about the US system and predicted that there would be a crisis where the government would not allow the free market death of companies in the name of public interest. Hello. Welcome to the 21st century.

    I find the idea of long term investing solid, however the idea of accepting the losses as a part of it, especially when one is fast approaching retirement, is a hard pill to swallow. Having ones investment wiped out by a bankruptcy only to watch the new improved leaner company with the management team which tanked your investment reach even higher heights does sour the effect. ( K Mart which wiped out equity (1/22/2002 BK) and then was so successful in turnaround buying Sears(announced 11/17/2004) a positive outcome the stockholders ( jokingly called the owners) did not participate in.

    Mutual funds which fail are hidden and folded in to successful funds. Yes long term there is great when your fund survives.

    I wonder how long our system will survive as the government is changing the rules of survival. "Too big to fail" being the mantra of bailout, meanwhile smaller companies are sacrificed to support the concept of bailouts.

    Long term for me has now become holding any stock longer than thirty days. There is no safety in long term as there are no companies which can fight the existence battle with the scales tipped. GM will still be here but the stockholders of today have worthless blips in the ether of their account statements. No one in power understands that this 401(k) IRA world is asking people to invest when they do not understand the real risks.

  • Report this Comment On June 06, 2009, at 7:02 AM, Strnj1 wrote:

    The only reasons I can think of for the "death" of "buy and hold are multi-generational. It works elegantly if you "qualify."

    a.) You have to start early enough, twenties, preferably. (these days, most that age are too far in debt.)

    b.) You have to have the sheer guts to ride out a downturn of this magnitude, stare the short sellers in the face, and tell them, "I don't care how much gloom and doom you can spread, I won't sell it to you for that price." ( ...too many my age are approaching a horizon where they fear that they don't have time to "make it back.") Sadly, many have a lot longer than they think. So, their answer, is to cut and run for the sidelines, missing all the buying opportunities (2002, 2008 / 2009)

    ...too many of the younger ones just graduated from "payday loans" to broker / sharks that sell shorting and day trading as the way to "make money." (no longer enough patience in the lottery generation.) Charts rule. They never work long term, but in their feeble minds it better than waiting.

  • Report this Comment On June 06, 2009, at 7:09 AM, wuff3t wrote:

    When this subject crops up it always amazes me how many detractors seem to think they are smarter and better investors than Warren Buffet. Honestly, are you?

  • Report this Comment On June 06, 2009, at 7:29 AM, Strnj1 wrote:

    Let me tell you one of the many success stories of long term investing.

    A.) I'm a maintenance man, so, wipe all the preconceived notions from your little head about, silver spoon, or whatever "sour grapes" you would like to pacify yourself with...

    B.) I am now worth more, even after "losing half" at one point (you haven't lost squat till you sell) than I ever thought I could possibly save.

    C.) I have already regained half of those "losses," even though the market has only regained a little over a thousand, by continuing to buy all the way down.

    D.) I'm the guy who gets a kick out of walking into someplace like a car dealer or other large ticket place wearing my uniform.

    Watch them come up with all of the scam / high interest deals, etc., tell them I heard their add where I could get such and such deal in their ads, have them explain that I would have to "qualify," ask them to run a credit check, and...

    ...watch their jaw drop..

  • Report this Comment On June 06, 2009, at 9:04 AM, cmr2fool wrote:

    As usual, I'm arriving late for the party. I've been mostly lurking at the Motley Fool since the late 1990s. At that time, I already had been "investing," mostly in 401ks and IRAs, for more than a couple of decades, but I didn't always proceed in a rational manner. Running across the Motley Fool and reading a few of the Gardner's books (most recently Million Dollar Portfolio) changed everything, and my timing didn't hurt either.

    By the start of the 2000-2003 bear market, my wife and I were joint 401k millionaires. Despite my "advanced" age, I directed every penny of our savings into equity funds in our retirement accounts. In mid-2007, I retired with a modest pension. During 2006 and the first part of 2007, I moved more of my retirement nest egg into bond funds and cash, both because of my periretirement status and also because I was becoming increasingly concerned about the market and the profligacy of the American consumer. I left my wife's accounts alone because she is slightly younger and continues to work.

    When the most recent bear market arrived, our net worth fell only about 18%. I like to boast that last year, our joint portfolio outperformed those of Bill Gates, Warren Buffet, and the Harvard endowment. My wife and I are young enough--and have enough in cash and bonds in our portfolio--to wait as long as necessary for the equity market to recover, and we are continuing to add to our equity holdings. It probably helps that we are compulsive savers and don't have particularly expensive tastes, but we lead a comfortable life and we have zero debt.

    In my home office are several shelves filled with books on investing and the markets; the only contemporary ones I've read containing wisdom comparable to the Gardner books are those by John Bogle and the Bogleheads.

    So, my advice to the younger set who frequent the MF boards is to pay heed to their precepts and, perhaps even more important, START EARLY.

    I have never felt the need to belong to one of the Motley Fool services, but I'm certain they offer good ideas, because I've occasionally "poached" some of the free information available on the site. I've watched the evolution of the site (and their business model) over the past ten years. While it is true there is a bit less free information now, I think their business model is much more sustainable. I remember very clearly when the Fool was forced to let several excellent writers go during the downturn at the beginning of this decade.

    And, as pointed out, they continue to provide free overall access to the site and to their excellent discussion boards, among the very few market-oriented sites where one can enjoy a civil interchange with other intelligent investors, as opposed to gibbering trolls from the shallow end of the gene pool.

    So, to the Gardners, a heartfelt THANK YOU for what you have provided to the investing community, more than a little of it gratis, since founding the Fool. You may not have made a ton of money off me personally, but you have earned my profound gratitude and admiration.

  • Report this Comment On June 06, 2009, at 9:33 AM, swlaaggie wrote:

    Good debate and I like the free articles Tom....even if the end has a pitch. I get it, no problems here.

    Buy and hold does not mean buy and then ignore. The "hold" for me is simply measured as the timeframe until the fundamentals change. The fundamentals could be associated with the company, the current point in the economic cycle, meeting a return goal, a need for cash, etc.. A perfect example is if you own a company who is being traded in excess of it's fair value, you better take some profits because the market will ultimately recognize the discrepancy and correct.

    Personally, I simply measure each holding as a risk-reward issue. If the upside reward is less than the downside risk, out she goes. Have I sold too early before? Sure! However, this beats the dog-snot out of getting out too late.

    If you are going to invest in stocks, then you have to pay attention. Surely the last year has taught all investors that lesson.

    Bottom line: Buy and hold does not mean buy and go brain dead.

  • Report this Comment On June 06, 2009, at 10:53 AM, mountain8 wrote:

    Go Swlaagie. Much agree.

    Most stocks for me are Buy and Hold, like Apple, Netflix, Nvidia that should stay relatively stable and grow. But I'm not ignoring a few fairly gambles like Melco and E-trade. Some change from long term to gambles, like Cemex or maybe from gamble to long term like Vesta. Cyclicals are short term. No mutuals. The point is An investor must remain aware and be flexible. All investments in a portfolio don't have to fit the same label. And your mix will always reach a point where a buy more/sell decision is important.

    NOONE, not me, you, MF or any other investment service can tell you anything about tomorrow with any certainty and statistics can pretty much tell you anything you want to hear. Your quality, in temperment, time spent researching, time spent watching your investments, pain tolerence, etc will determine what type of investor you are. If you are not willing or able to do your own picking, you have to rely on somebody else, fund managers, your friends, or investing sites. Judge them and live with it. Fools are not usually fools. More about my thoughts on buy and hold vs short term see

    http://boards.fool.com/message.asp?mid=27720518 on the SA board.

    Plug to MF: I had all my bucks in fidelity funds. Great company and did ok. But thanks to MF and all these free ads, I came to realize sometime after Oct 07 that I needed more control over my investments. During the drop I sold every fund and began investing in individual stocks that I had time to research. But I only had time for a few stocks (31 right now). I picked MF and from their info, I began.

    I lost a bundle, about 42% at the low. But thanks greatly to being foolish, now that the market has returned about 40%, I am just about to pass my break even point. What that means is MF guidence has helped me get back to 2007 while most investors are still in the 1990s. Thanks MF for:

    ACH, up 179%,

    Freeport-McMoran, up 143%,

    TransOceanic, up 76%,

    Vestas - 66%,

    Titanium - 61%.

    Conversely to be fair,

    Focus Media - down 57%,

    Garmin - down 44% etc

    MF didn't make my decisions but they sure helped and for the cheap (don't change it now) price of SA, I'm sleeping better than most. What MF did do is give the resolve, the strength and the information to make decisions. Scary decisions at times, but decisions I could never have made on my own with the type of results I cite. Therein lies the value.

  • Report this Comment On June 06, 2009, at 11:03 AM, BobbieM91 wrote:

    I have been a member of MF for many years. I bought one of their free recommendations my first year with them-HWKN. It is was one of the first of my stocks to go back to the red after this crash.It is in all of my porfolios and is a definite buy and hold.

    I pulled my IRA from a broker and put it in a self directed IRA at ShareBuilder after studing with MF and running a sample porfolio for 6 months. I am almost back even again today with all of my porfolios. I lost less than 40% during the "crash". thanks to the teachings of MF, I buy and HOLD good companies that pay dividends or are outstanding in their sector. I have learned to look at cash flow, PE, their basic business, and many other things by reading MF newsletters. I tried other services that wanted you to buy and sell on a more frequent basis than I liked. Even tho I get free trades on my account every month, I don't feel the need to use them to sell good companies to find a profit somewhere else. I saw that this other service was "chasing" a profit amost like a day trader. I don't want to chase profits.

    The buy and hold is not dead. It is just in a bit of remission as many look at what they have bought and are readjusting for the future or are running scared because they did not look a the fundamentals when they bought companies. I sell companies when their management changes the companies basics and I don't like where they are going or they are just not able to stay ahead of the competition in that sector due to a myraid of reasons. You have to pay attention to the basics! Some companies may be a driving force for 30 years, others for only 5 or 10.

    Yes, I do own companies like JNJ, BAX, MO, GIS. but I also have tranportation (CSX which isn't doing really great today), oil (XOM), commodities (WMT). Some of these are recent aquisitions, some are 10 years old as I didn't start investing until I was 50. My worst performers are some that I "took a chance" on, but only one is a company that I am totally attached to and and will hold until it hits 0 even tho I know that is no way to make money. (I am a diehard HOG fan,so I own my small piece of it.)

    I am not young (60) so I don't have a really long time frame for investing. but I don't totally believe in the "safe" 1% money market just because I am older. Because of my age, my ex-broker wanted me to be in mutural funds that today are less and 50% of what they were and are not showing any real signs of recovery even now. I rolled that account into a self-directed IRA when I saw that the mutual funds that he had me invested in were not making a profit for me whereas my "play" profolio that I set up after reading a lot of MF articles, was giving me much better returns for less expense. (broker trade $30, my trade now $0-$10) I did get my 401 into a money market fund that lost less than 4% as the market was crashing, so I was luckier than a lot of people who did not change their elections as the market was going down.

    If you don't want to "work" on your porfolio, then use ETFs or mutual funds that have low expenses or pay someone all your profits to do it for you.A CD is guaranteed a 1.25% return if you really want to be safe. If you want to do day trading, listen to the the gurus on TV and go your merry way and watch your money go away. I, for one, will invest in what I believe to be good companies with good dividiends, and those companies that may grow up and start paying dividends. I don't buy and sell freqently but I do keep putting more money into the stocks that I do have.

    The MF is still a source of information for me and I treat it as a continuing education credit expense.

    Thank you MF for all the help. I am not always fond of all the ads for the newsletters, but I do look at the different news letters and advertisements and only buy into what I feel will best help me to find excellent companies at excellent prices. The Gardners have a lot of excellent advice for those of us who don't like the herd mentality of the brokers and want to be in charge of our own destinies. Like many others here, I don't buy all of their recommendations, but the advice gives me a place to start for my buy and hold on good companies at excellent prices.

  • Report this Comment On June 06, 2009, at 11:17 AM, visualize wrote:

    I agree that a few too many articles come with a sales pitch. I understand that the site runs not on advertising, but on services and memberships, and appreciate that the basic site is free. But I think a few too many of the "articles" sent out in email are thinly-disguised pitches as opposed to actually informative articles.

    But this is what gets me: I clicked the link above to check out Motley Fool Pro, and there is no information about pricing at the link. Just a sales pitch that I'd better enter my email address because seating in the service will be limited. But no real description of what the service is: advice, education, tips, what?

    Watching the video, however, suggests that it's more like a class about how to do more advanced trading. It sounds EXACTLY like the recent 2-day workshop I attended from Investools (don't worry, I didn't sign up for any $5000 educational programs!) which touts their ongoing classes using "options, ETFs, and more." While informative, the 2 day class included regular commercials about forgetting "buy and hope" (their words) and getting into Options etc.

    Before entering an email address (and I may get the offer anyway since I'm on a mailing list), I always want to know: what are you selling and how much is it gonna cost? This sales pitch sounds way too much like going to a "free vacation" that includes the time share sales offer. :)

    I just feel that the way this is handled is not what I would expect from The Fool.

  • Report this Comment On June 06, 2009, at 11:43 AM, TideGoesOut wrote:

    I've always liked the buy-and-hold as a percentage of portfolio equal to your age. I'm 39, so 39% goes into stable stuff.

  • Report this Comment On June 06, 2009, at 12:23 PM, TMFFischer wrote:

    I'll add to this discussion an interesting study I just read. A study of all of the stocks on the U.S. markets from 1980 to 2008 found that the top 25% of performers accounted for all of the market's gains, showing 10.2% annualized returns. The bottom 75% of the market's performers collectively *lost* 2.1% annualized over this 28-year period. When you think about capitalism, this makes perfect sense: the big get bigger and the strong stronger, while the majority (the small) often fall by the wayside. So, buy and hold only works if you're buying the right stocks. It's like any investment. You can't buy real estate blindly and hope to make money. Location means a great deal. Nor can you just buy any stock and hope for returns if you just hold long enough.

    The Fool has always said indexes help you avoid this conundrum by casting a wide net, and that's true. But to do better than an index (which can go nowhere for years, even a decade or longer), you need to be an exceptional stock selector and/or use other investing tools, too. Foolishly, Jeff

  • Report this Comment On June 06, 2009, at 12:29 PM, mizzoushark wrote:

    I like the concept of buy and hold, but recognize that my attention span is so short that it won't work. I really like the concepts that the Pro service uses because they fit in well for me. I particularly like using options (both selling calls on stocks I own and selling puts on stocks that I may want to own) as I can see how it will produce a relatively stable income stream for me when I retire.

    The ads at the end of articles don't bother me at all - if I don't want to read them, I just move along. It makes sense to me that the MF folks would be including a pitch and offer to try out a service at the end of an article. After all, isn't the best way to demonstrate the value of a service to a nonsub to allow a free sample? Makes sense to me.

  • Report this Comment On June 06, 2009, at 12:58 PM, JSinvestmentguru wrote:

    Don't buy or hold companies that are going bankrupt...There is no good price for them. The shareholder is completely wiped out..I learned about that with WCOM, later sold for 57 billion to another cell company but only after my share value was declared zero. Buy and hold Great companies with low debt, good products and lots of cash...like Apple, etc. But I liked Apple a lot when it was $87 share and I bought 900 shares...It's not as good now at 145 but still probably has $35-45 upside in the near term...JS

    PS I also lost plenty with the fiber optic companies, like Nortel, Lucent...Now I like Deere, Apple, Oracle, Electronic arts, Activision, Exxon mobile, Pepsi, Proctor Gamble, Delmonte (bought 3000 shares at 6.10, now 8.20) unfortunately I only wanted to make 20% in 6 months and sold June 20 covered calls for 7.50 strike price...JS

  • Report this Comment On June 06, 2009, at 1:17 PM, mizzoushark wrote:

    JS - You can't cry over spilt milk (my mother used to say that). I've had some good trades this year - and I've had a few that were not so good. Just learn from the oops' and move on down the road - just sayin'

  • Report this Comment On June 06, 2009, at 5:07 PM, boogaloog wrote:

    As long as Tom asked for suggestions (yesterday at 5:04 pm) ... I am one of those who agreed that too many articles are a pitch for premium services (of which I am a member). But after reading the complaints and Tom's response I finally realized that my annoyance is that back in the late '90s, MF used to have daily (or almost daily) articles which taught fundamental economic principles (how to calculate RONA, how to read quarterly statements, etc). I found these to be of infinite value, and I wish they still existed to remind me of how much I've forgotten. In my opinion, THAT's what is lacking from MF now. You can't "educate, enrich, amuse" without the educational articles.

  • Report this Comment On June 06, 2009, at 8:32 PM, pixal wrote:

    I believe in buy and hold as a philosophy. Therefore, it influences all of my purchase and sale decisions. I like that influence. I don't have to worry or check the market every day to know I've made the best long term decisions I could make.

    What I don't understand is why the Motley Fool doesn't evaluate their stock picks in accordance with their stated buy and hold philosophy. The pick of last month is equally weighted with the pick from years ago. Why?

    By the way, I'm not even sure that Tom's and Dave's "Average Returns" even include yield.

  • Report this Comment On June 06, 2009, at 8:34 PM, DavidMountain wrote:

    On the subject of TMF having hidden agendas; they certainly would be in a great position to be, please read this not as an accusation but a speculation.

    I am an avid computer gamer and I have spent a lot of time in a game called EVE that has an amazingly realistic market economy that at least one harvard economics graduate is in the business of studying owing to the fact that all the data about who buys what and what happens consequently is all recorded and easily accessible. He obviously chose to study this because he considered it a realistic enough market to study for real life applications.

    That being said and as a background for what I'm saying, I hit on the idea of manipulating the market by buying large stock of certain commodities and then marketing them, thus hiking the price and then getting out when the price had climbed and I made my profit. It worked on a small level but I lacked the funds to really control the market and the ability to market the comodities well.

    That being said TMF is in a great position to buy stocks real life and suggest it to their audience. Thus the demand increases, the price increases, and they are proved right in their prediction that this stock was a good stock to purchase. They COULD then get out before the stock settles to a more realistic level and enjoy the profits.

    Not saying it happens, but that it could.

  • Report this Comment On June 06, 2009, at 10:17 PM, SnapDave wrote:

    Tom,

    I'm not going to complain about the fact that you need advertising. I can live with the current level of anoyance. What I am very concerned about however is the blatant dishonesty in the MFPro pitch. TMF frequently uses the quote about being an 'ethical oasis'. That generally seems to be true. I would like it to remain so. Jeff has a fine service that didn't need to be embellished and I've decided to keep it for now, but the pitch deeply bothers me. I think we are owed an apology and it should be rewritten. And yes, I'd be willing to go back over that dreadfully long thing to point out the problems if there is serious interest.

    Since you brought up Buffet I'll remind you that in the late 60's he couldn't find any stocks cheep enough to buy and refunded his investors, then in the last several years he has been holding an enormous amount of cash, both wise moves given what happened next. Of course you and I aren't Buffet but maybe there are times in buy-and-hold when we should be treading more carefully.

    MKArch,

    Re: your second paragraph, I think a better way to look at it is that emerging markets have broken down some long standing moats and will build some of their own. That this is happening on such a massive scale is startling and very disruptive.

    I think that governments in emerging markets mostly are supporting profit and competition or they will tend to stagnate. Look at China vs. India. I have no money in India, it's a mess.

    Bill Mann thinks more macro than he gives himself credit for. I too sorely miss him.

  • Report this Comment On June 07, 2009, at 2:52 AM, petersig wrote:

    I learned about stock market ups and downs 45 years ago, when I was the clerk in the office who stayed late to calculate margins on all the accounts. So I had some basic knowledge of stocks, and the market. My strategy, though, was to wait until the stock market was really down, before I started buying. That's because I bought into the idea of "buy and hold." It means to me to buy when the stock is a ridiculous bargain, and hold until it has outperformed all expectations -- in a short time. If, then, it doesn't retreat from the heights, I'll hold it.

    I didn't start investing until last October, probably because the other bit of "buy and hold" wisdom recommended IBM.

    In October and November I bought Netflix, Microsoft, Google, and JNJ. I bought Netflix and Google because I understood what the companies were about; I bought Microsoft and JNJ; although I also understood them, I bought them because MF writers touted them as "blue chips" that paid good dividends and were great stocks to buy and hold.

    I've sold two of the four stocks, and held on to the other two for eight months. I sold JNJ at a loss, as it slid to 10% less than I paid for it. Microsoft traded sideways until a rally in April or May. When it reached a dollar or so over what I paid for it, I dropped it.

    I'm now holding onto NFLX and GOOG, as well as Vestas -- originally a gamble, as another comment put it, now a long-term hold. On these three, if MF newsletters have recommended them, it's after I bought them. Nice to get that confirmation.

    NFLX and Vestas are not the typical longterm hold stocks that "buy and hold" means to me, yet they are building the value in my portfolio nicely. I don't expect them to last as "hold" stocks forever, but they might.

    I *like* the more volatile stocks; that's because I buy them cheap. If I think the price is ridiculous, its time to check why the depressed price. If there's a good reason for low price, and some buyer interest in owning the company stock, then go for it.

    "Buy and Watch" seems to be a working strategy; better yet, "watch, buy, watch."

  • Report this Comment On June 07, 2009, at 4:19 AM, jrj90620 wrote:

    One of the main reasons Buy and Hold is so good now is that it is very contrarian today.Most people in America are spoiled/entitled/greedy and are not interested in any kind of investment that doesn't promise instant rewards.They are also too lazy to do any research to find great investments.This means you have the opportunity of buying low priced stocks because a company's stock is low for some temporary reason and will be a great holding longer term.So,I'm taking advantage of the short sighted majority by taking the contrarian position of buying low when no one wants it and holding for the long term reward.

  • Report this Comment On June 07, 2009, at 4:31 AM, jrj90620 wrote:

    Forgot one thing.You have to buy companies.DON'T BUY STOCKS.If you are investing long term you have to feel like you own part of the company.You are a partner in a company.You totally know the products and maybe even use them.Check out books by Peter Lynch for this type investing.I believe Warren Buffet also uses this approach.If it's only a stock to you then likely you will panic out in a bear market.

  • Report this Comment On June 07, 2009, at 4:42 AM, automaticaev wrote:

    im starting a new strat with etfs in specific sectors based on severa; factors. I doubt i would need to hold longer then 6 months. Can increase money faster this way i do belive.

  • Report this Comment On June 07, 2009, at 4:43 AM, automaticaev wrote:

    do panic out in a bear market then buy the same amount of shares you had before for less money. Unless your really lazy i guess.

  • Report this Comment On June 07, 2009, at 4:44 AM, automaticaev wrote:

    if your really lazy just ignore it for 10 years or w/e. Mabe you open your account and have a lot of money.

  • Report this Comment On June 07, 2009, at 7:46 AM, Yosako wrote:

    Buy and hold gives highly volatile results as it's basically making a purchase and then leaving things to chance, usually without even having a idea of when to take profits or get the hell out of the stock or index fund you got into.

    Being "lucky" shouldn't be part of any wise retirement plan.

  • Report this Comment On June 07, 2009, at 8:03 AM, wuff3t wrote:

    "Buy and hold in a bear market just has to be a disaster as a general rule...."

    Actually bear markets are the best time to buy and hold. As long as you're concentrating on fundamentally sound companies they're the best time to buy, period.

  • Report this Comment On June 07, 2009, at 8:31 AM, jry56 wrote:

    That's one of the stupidest generalizations that I've read on your site, and there have been a lot to choose from!

    Timing of sales and purchases should be based upon VALUE considerations. If you believe in the intrinsic worth of a stock, you should hang onto it until it reaches the price that you think it should fetch, and then sell it. Of course, often stocks never reach those strike prices, but that is where trading becomes more of an art than a science . . .

    It seems that the majority of folks have very limited medium or long-term vision when it comes to investing. If you can take the long view, you'll probably be far ahead of the instant-gratifiers.

  • Report this Comment On June 07, 2009, at 8:36 AM, WORKofART wrote:

    Well, the biggest problem I see is that it isn't as simple as Buy-and-Hold. It is really Buy-->Pay Attention Along the Way-->Continue to Hold for as Long as it Takes to Meet or Exceed your Goal.

    I guess that I have been wired for investing. When I buy an equity, I try to pay value prices (good/great companies on sale) never flinch if it drops another 10, 20, 30, 40, 50 %. See this more as an opportunity to buy more at even better prices. I am very comfortable with this approach since I believe in broad diversification. Yes, sometimes I will be wrong and I accept the fact that some of the companies I buy will go to zero. When a stock reaches or exceeds my goal price, I sell some or all of the position (harvesting profits along the way).

    Anyway, for me, Buy-and-Hold forever without paying attention has never been an option. But, Buy-Pay Attention Along the Way-Continue to Hold as Warrented by the Valuation

  • Report this Comment On June 07, 2009, at 12:30 PM, jazzkeys wrote:

    I think it's really sad that TMF has been reduced to this. A couple of years ago, this was by far my most visited website. Now, I hardly come here. The reason is because every article is just a sales pitch for one of their premium services.

    They used to be about educating the little guy about personal finance, insurance, shopping and investing. The information was timely and usually unbiased. Now all we get are commercials and love notes to Warren Buffet (and hate notes to Jim Cramer).

    When all of their products were centered around "buy and hold for 30 years", why didn't we see articles like this one stating that buy and hold won't work for many/most people? Now that they have a more diverse selection of premium services, we get more articles pushing all sides/styles of investing!

    The only diversity that existed was between the Gardner's growth vs. value discussions! It's really a shame that they have sold out just like the financial companies that they always criticized!

  • Report this Comment On June 07, 2009, at 7:01 PM, tanndou wrote:

    I think it's a lot like gardening.. At times, you need to feed and water your plants, but if you have the right plants and the right environment, they will give you substantial growth over time. When investors make the mistake of buying and holding businesses that have poor fundamentals or a poor product, they are not tending to their garden and taking out the weeds.

  • Report this Comment On June 08, 2009, at 5:20 AM, daveandrae wrote:

    A whopping 70% of the wealth in this country, is controlled by a mere 3% of the population. Think about THAT for a moment.

    Buy and hold is simple, yes. but it is far from easy. If buy and HOLD were EASY, then a whole lot more people would be wealthy, now wouldn't they?

    Coca-Cola, a blue chip stock anyone with a 5th grade education can understand is up over 9,000% over the last 35 years, yet more than 97% of the population missed the run.

    As recently as March 2009, this simple, yet very powerful stock was trading at a very reasonable 14 times earnings, yielding 4% in dividend income. This is the same PRICE Warren Buffett paid for it in 1989! ( adjusted to 4 bucks a share, post splits) . Yet, there were with NO takers!!!

    Truth be told, most people do NOT have the stomach, nor the patience for the stock market. You need both.

    If you are reading this post, are less than 45 years old, and do not smoke, then you are likely going to live for another 30-40 years. If history has taught us anything, over that kind of time horizon, a 50-60,000 handle on the DJIA is simply inevitable.

    Thus, the one thing all LONG TERM equity investors have in common is FAITH. For without faith, I would have tossed my Dow Chemical, General Electric, Harley Davidson, McDonalds and Pfizer stock overboard a long time ago.

    David

  • Report this Comment On June 08, 2009, at 7:47 AM, madcowmonkey wrote:

    Are we throwing out the idea that buy and hold is only for a percentage of the portfolio? It seems like people are ignoring that fact when discussing the topic. I like the idea of your age equals the percentage, but I think the true buy and hold strategy is when parents invest for their kids and hand it down. It doesn't have to be much.

    Even buy and hold should evaluate their stocks when the market appears to be on the outs and as an average investor, the buy and hold isn't a shackle, just an idea that may or may not work depending on the weather outside.

  • Report this Comment On June 08, 2009, at 8:34 AM, henryking54 wrote:

    Motley Fool Pro is a bad joke. It barely hedges anything. All it does is sell covered calls or sell out-of-the-money puts (which do NOT protect against a severe decline) and purchase high-cost, tax-inefficient inverse ETFs. Heaven help anyone who actually wastes money subscribing to that "service."

  • Report this Comment On June 08, 2009, at 9:22 AM, TMFFischer wrote:

    henryking,

    The Pro service's main objective is to make money in up and down markets, and so far it's been doing that on the vast majority of its positions (but it's young, so we won't pat ourselves on the back). Excessive hedging in this market of extremes actually makes much less sense -- it'll probably make more sense later. When the market is handing you deep values, you don't need to hedge nearly as you would in a market that has been rising for a few years. When the market is handing you extremes, you need to take a stand one way or another (buy, if the extremes are inexpensive; sell, if the extremes are expensive). So, we're investing in a way that seems best in this market rather than hedging every move we make. We want to keep making money. You need to take a stand to do that; and you hedge when there's more reason to hedge. Best, Jeff (MF Pro)

  • Report this Comment On June 08, 2009, at 10:19 AM, Deepfryer wrote:

    "I think this article nailed it on the head. The people who are saying "buy and hold is dead" are people who are not temperamentally suited for it. I don't see any reason to expect that buying great companies at a discount will suddenly stop being extremely profitable."

    True in some respects. However, a great company today might not be a great company 20 years from now. Look at the example of Eastman Kodak... or look at GE and US Steel. Not very long ago, GE was the largest company in the world... and if you go back a little farther, the same was true for US Steel. Neither one is looking very good these days. In fact, if you look at the largest companies in the US from 50 years ago, many of them don't even exist anymore.

    In terms of buying at a discount, a company could be underpriced today and become overpriced six months from now. What you want to do is sell your stocks at their peak, regardless of whether you've held them for 30 years or 30 days.

  • Report this Comment On June 08, 2009, at 11:35 AM, thefist wrote:

    When you really think about "buy and hold", there really are 2 forms of this:

    1) buy and FORGET

    2) buy and HOMEWORK (this term brought to you by TMF's favorite TV personality, Jim Cramer!).

    Buy and FORGET is what has been losing all the money.

    Evaluating a hold or sell is just as important as the buy. This appears to be just what MF Pro is all about.

    <Hey TomG and Jeff, how 'bout a free month for the plug?>

  • Report this Comment On June 08, 2009, at 12:46 PM, Aphexwolf wrote:

    Well IMO, it's not the length of time that you're holding the stock that matters, it's the fundamentals of the company that matter.

  • Report this Comment On June 08, 2009, at 1:43 PM, dp23peace wrote:

    I began studying the market when this downturn began and found the Fool to be the place that agreed with my "philosophy" that I was starting to form. So, when I felt I had learned enough to get started I put money into 15 companies with the intention of buy and hold, and add as you go. HOWEVER, my concern is that because I ended up buying most of my stocks around March 9th and am up 42%, when will I get a chance to buy lower than that again? If I add to any positions I will be paying more than I did to start. Any advice?

  • Report this Comment On June 08, 2009, at 2:35 PM, TheHague wrote:

    I am a beginner investor. I started in February. MTF was the first site I went to for help. Not knowing the ins and out of marketing I signed up for everything. Soon the 30 day trials ran out and the bills hit! I politely asked a credit to be written and they complied with no argument! I appreciate their site and use it regularly, but only the free stuff! They never harass or brow beat! Now that I know what to look for the promotions are just that and I let them trigger my research instinct rather than get mad for them trying to raise money to pay for this valuable service they perform. Some day, maybe today with the new day trader type service I will "buy and hold" a membership. Until I do though I will appreciate this site and always be aware that they have bills to pay to keep the information that I crave coming! Thanks TMF!

  • Report this Comment On June 08, 2009, at 3:03 PM, TMFTomGardner wrote:

    MikeinMadrid, I applaud your curiosity and your skepticism. I mean that genuinely. I think it's always a good idea to search out what the areas of tension are inside of any business. Every business has the pressure of serving customers, employees, and shareholders. We are no different. But the issues you're raising aren't pressures inside of our business. We do not have advisors feeling pressure to hold or not to hold any stock. Our advisors are tied tightly to performance metrics -- like long-term investment returns and renewal rates of members to the service. I hope you can get value out of these services. If not, of course, you can cancel and be given a pro-rated refund instantly. Foolish best.

  • Report this Comment On June 08, 2009, at 3:03 PM, TMFTomGardner wrote:

    Chinaboy99, great post. Your example is a good one -- of Johnson & Johnson turning $5,000 into $120 million since 1943 (even with many multiple 50% drops in price along the way). I then match your thought up to Jeff Fischer's stats about 25% of all public companies being outperformers over the last decade. Obviously, that number gets even smaller as you look for winning public companies over 65-year periods. I don't say that to destroy your point. Rather, it is a reminder that one must make a deliberate effort to find the sorts of businesses that will win over the next 10 years, or next 25, or next 50, etc. These are different sorts of organizations. They can be found. But they demand a search -- and then a willingness to stick with them when their stock prices falters, IF you still believe in them. Best of luck on your search!

  • Report this Comment On June 08, 2009, at 3:03 PM, TMFTomGardner wrote:

    MFRB101, thanks for your kind words. And agreed -- unless you are willing to take the Shelby Davis approach to broad diversification, then the buy-and-forget-for-ten-years approach won't work. Remember, though, that America's greatest ever investor Warren Buffett *does* advocate the buy-and-forget-for-ten-years approach. Nonetheless, I am more in your camp of buying and evaluating along the way. Fool on.

  • Report this Comment On June 08, 2009, at 3:04 PM, TMFTomGardner wrote:

    chantillydude, I think if you read the article again, you'll see that I believe buy-and-hold investing is appropriate for people who demonstrate the four Ts (and maybe, yes, that fifth T called "thinking"). I don't think it's heretical to refine your vision as time passes. And the more I learn, the more I realize how different are the skills, needs, and interests of the millions of different people that hang out at Fool.com each month.

  • Report this Comment On June 08, 2009, at 3:04 PM, TMFTomGardner wrote:

    bernbern0, thanks for the kind words. My belief is that, in the end, one of the most important things any of us can do as investors is to keep learning. I think Charlie Munger said that the great investor demonstrates "a lot of curiosity about life and for a very long time." It seems to me you have it.

  • Report this Comment On June 08, 2009, at 3:04 PM, TMFTomGardner wrote:

    halomaster, as I'm sure you know, I very much agree. When I invest, I buy a stake in a business -- which I then plan to follow for years. Of course, there are a great variety of ways to make money as an investor. But I do think it begins with a desire to learn something. And when it comes to stocks, I think viewing them as stakes in a business is critical to truly great long-term results.

  • Report this Comment On June 08, 2009, at 3:04 PM, TMFTomGardner wrote:

    bobtoni, love the Reagan quote. One of my all-time favorites -- insightful, humorous, true.

  • Report this Comment On June 08, 2009, at 3:04 PM, TMFTomGardner wrote:

    JustMee01, amen. Imagine choosing to buy and hold technology businesses with little history, unremarkable leadership, trading at 80 times earnings, when 99% of the cash on their balance sheet comes from financing actions. The key for buy-and-hold investors is to find the reverse and to, over and over again, buy these situations, add if the valuations get even more attractive, and to think long term.

  • Report this Comment On June 08, 2009, at 3:04 PM, TMFTomGardner wrote:

    MKArch, nice seeing you out here. I think before the wheels of globalization were really spinning fast, you could get away with largely ignoring macro factors. That is no longer true, and macro analysis should be at least a portion of everyone's investment work. That said, I hate the feelings of false precision and the overly confident projections I encounter out there. Let us remember that the monster bears that called this market collapse are odds-on favorites to seem ignorant for mission the turnaround. I think macro should be a source of influence in our approach, but I think the analysis should focus on the evolution of trends NOT the revolution of a single big market move.

  • Report this Comment On June 08, 2009, at 3:05 PM, TMFTomGardner wrote:

    cwalthers, I still think you can succeed as an investor by only checking in on your portfolio once a year. Now, that said, you have to deliberately search for companies (often dividend payers with little or no debt) that you don't have to study quarter by quarter. This is a matter of choice. But don't feel you have to watch the ticker tape if you really want to be a long-term business investor.

  • Report this Comment On June 08, 2009, at 3:05 PM, TMFTomGardner wrote:

    FlorisHJ, I like the sound of your approach very much. When things get extreme -- either high or low -- that is often time for an action. Selling when you can't understand why a stock has gone so much higher than you'd thought possible -- even maybe just selling a portion. Against that, when the market is cratering...going in and buying, on the assumption that world is not about to end.

  • Report this Comment On June 08, 2009, at 3:05 PM, TMFTomGardner wrote:

    StockTradingFool, I think you have it nailed. Best of luck -- though I do not think luck will govern the performance of your investing approach.

  • Report this Comment On June 08, 2009, at 3:24 PM, spongeLarry wrote:

    The real question is: "Which is better, buy and hold, or in-and-out?" over a 10 year period. All these so called "studies" you read about that "prove" that going in and out of the market doesn't work, assume that the hypothetical trader got in and out ALWAYS at the wrong time. This is BS! Consider our current bear market - it kept falling, falling, falling, ... surely ANY "out-rule" you follow would have got you out of that market and protected your assests somewhat - a helluva lot better than buy-and-hold. Of course you can't be perfect with timing the market, but you don't HAVE to be perfect. You'll get it right 50% of the time, and you'll always be saved by major crashes like we've seen. I'll bet this works better than buy-and-hope over 10 years.

    If you want to define buy-and-hold with a 20 or 30 year period, then you get into such a long time frame that at the end of the 'experiment', you've forgotten the question or its not relevant anymore. 30 years! good God! If you wait long enough, you'll always come out on the positive side. But the question is: did you do BETTER than if you timed the market? Given the crashes we've seen, I can't imagine that a careful trader could do worse.

  • Report this Comment On June 08, 2009, at 3:44 PM, danshirey wrote:

    In the subject of why every MF e-mail has to be a sales pitch...Tom's reply. My position is that if you give me good information either free or low cost I will buy your premium services. If you are always in "hardsell" mode then you destroy your credibility and abandon the original "educational" benefit of MF. If you answer questions I will listen and ask (buy) more answers. If you only ask the question then try to sell me something I become distrustful of your motive. MF has become like every other person or company on the web hawking their wares. Mostly I tune you out.

  • Report this Comment On June 08, 2009, at 4:36 PM, XMFRael wrote:

    spongeLarry... i like the way you think... but... I'm reminded of John Bogle's comment that to properly time the market you have to be right twice... once in and once out. Most of us find the "out" pretty easy. It's the back "in" that kills us. Likely, this is why they say tht bull markets climb a wall of worry -- the worry is all the people who got out convincing themselves that now's not yet the time to get back in. As Tom says, "know thyself." I knoweth mineselfith... and if I miss the bottom it gets harder and harder for me to get back in as the market climbs. this killed people i knew back in 1987. It could happen again. (BTW Tom, I dig the pitches!)

  • Report this Comment On June 08, 2009, at 4:53 PM, TMFTomGardner wrote:

    RunFin, thanks for sharing your thoughts and for your kind words. While there are fair questions about the commercial tactics we take to be able to share all of our analysis in 50+ edited articles every day, I don't see any good challenges out there to the way we run our newsletter services. I'm glad to hear you are enjoying Hidden Gems. Our goal is to make these services unlike anything available anywhere ever....in endlessly good ways. Foolish best.

  • Report this Comment On June 08, 2009, at 4:53 PM, TMFTomGardner wrote:

    dgmennie, I actually largely agree with your edgy point. I think most people -- and this includes the great majority of investment advisors out there today -- do not have the proper context for how to think about their investment portfolio, their investment decisions, and their lifetime of investments. I don't fully agree with you that thinking 20 years forward is an absurd idea. I think anyone under the age of 40 should be doing that without hesitation. Unfortunately, we live in a country whose school system would prefer to emphasize S.A.T. scores and college admissions...than to emphasize the teachings of Ben Franklin et al about how to live a productive, prosperous life. If we insist on teaching that which often neither inspires the student nor prepares them for the necessities of living...we should not be surprised to see such poor financial decisionmaking and short-term obsession. Now, I know the focus of your comment is more about those who cannot look 20+ years forward. And you're right...a combination of great financial planning, portfolio diversificaiton (inside and outside of equities), a sound understanding of timelines, and a commitment to honest benchmarking...these are key. This is why a service like TMF Pro exists at The Fool -- as well as Rule Your Retirement. And we will be offering more for the investor that cannot think and act 10-20 years with their investments. Thanks for your thoughtful note. Cheers!

  • Report this Comment On June 08, 2009, at 4:53 PM, TMFTomGardner wrote:

    Stan8331, I think your plan makes a great deal of sense. You understand the different environments you are investing in...and you are moving forward with a feeling of gradualism. Onward.

  • Report this Comment On June 08, 2009, at 4:54 PM, TMFTomGardner wrote:

    ReadEmAnWeep, I hope you don't see this article as going against the grain of Foolishness too much. I do believe that as your time horizon shrinks below 10 years, you really have to start forcing diversification outside of equities on your portfolio. You have to get much more serious about financial planning than you do if you're an 11-year-old investor buying his first stock. That was Mr. Buffett -- buying at age 11. And by starting that young, he never had to worry much about asset allocation. He was buying large properties by 18. He was a millionaire not long after. He has lived without financial need -- because of his own fascination, dedication and discipline -- throughout his entire life. So we cannot look to Buffett for portfolio strategies for investors with less than 10 years! (That's fine...we can look to him for so much else in and out of the financial world!) If you haven't done so, I recommend taking a free trial to Rule Your Retirement. As I trust that you know, you can take a look at the service for a month with no obligation. Cancel and you won't get any grief from us. But drop in there and look at all the different allocation strategies outlined by advisor Robert Brokamp. Very helpful, I think.

  • Report this Comment On June 08, 2009, at 4:54 PM, TMFTomGardner wrote:

    papaegan, your note is what this is all about. The Motley Fool -- the world's greatest investment community. Our greatest interest is in learning from each other. Thanks for diving in.

  • Report this Comment On June 08, 2009, at 4:54 PM, TMFTomGardner wrote:

    robstuck, you actually have one faulty assumption in there. But again, I encourage your skepticism about our business. Challenge. Ask questions. Make sure we are right for you. But I want to assure you that the way our business works is simple membership. People subscribe. The average membership is around $200/year. And our goal is to deliver the best investment results and the best learning experience imaginable -- such that members renew, tell their friends, who also renew, and so on, and so on, and so on. So whether a particular member buys, sells, or holds a particular stock is not the driving factor behind our business. Whether or not they feel they are being served ideas, analysis, insight, and a chance to talk with other investors that is unmatched anywhere -- thus causing them to become a member and to renew -- those are the workings of our business. Thanks for participating!

  • Report this Comment On June 08, 2009, at 4:54 PM, TMFTomGardner wrote:

    karensboyfriend, thanks for the comment and kind words. Our aim is to make Fool.com of very significant value to anyone...regardless of whether they choose to become a paying member. To be clear, we lose money on non-paying, non-member Fools (we still call them Fools, though). This is a deliberate decision of ours. It helps us fulfill our mission of educating, amusing and enriching. But it also acts as a word-of-mouth machine. For every person who loves The Fool but never subscribers, we know they'll tell friends, who will tell friends, and so on and so on and so on. :) And that will create value for us -- perhaps not in the months or even years ahead, but in the decades ahead, the value will be very substantial. I'm glad you're out there, enjoying our Foolishness. Of course, I'd love you to find a membership that serves your needs and is worth paying for. But if not, continue to enjoy the free coverage of the markets as well as the 6000 stocks covered on our free service CAPS. And who knows, maybe karensboyfriend will convince "karen" to spend time at The Fool, and she'll become a paying member!

  • Report this Comment On June 08, 2009, at 4:54 PM, TMFTomGardner wrote:

    joandrose, I think targeting a three-year investment time horizon makes sense. Again, I think a lot of it is about really understanding the implications of the time horizon you choose. For those who will be buying stocks for the next 60 years, looking for a company like Johnson & Johnson was back in 1943 is the most intelligent work you can do. But if you only have a 6-year time horizon, valuation becomes more important; present management become more important; today's economic cycle becomes more important, et cetera. You have locked down on a 3-year time horizon, and I believe you can do very well thinking that way...so long as you see things as they are in terms of the benefits and challenges of focusing on that time period. Fool on!

  • Report this Comment On June 08, 2009, at 5:47 PM, TMFTomGardner wrote:

    RGGrass, I understand your disillusionment. I haven't read "Arrogant Capital", but it certainly matches up with some of the things I've witnessed growing up in and living in the Washington DC area for most of my life. There is an obvious truth, slapping us across the face, but it's difficult to address. And that truth is that our elected officials are being influenced by special interests with pools of capital to such a degree that we might want to call it "bribery." This is a very real and very unchecked aspect of the governance of our republic. So long as that persists, there are all sorts of artificial supports and absurd constraints to our commercial system. Regulations can start looking pretty random when special interests can spend money to buy deep modifications. When one party is in power, certain areas of American life are strictly regulated and others run free. When the next comes into power, there is a reversal. The people align themselves behind either party philosophically....but there isn't a great enough incentive (yet) for the people to realize that there have to be systemic changes that have nothing to do with party affiliation. So we go through cycle after cycle without getting our heads enough above water to clean up the pollution we're creating in the political process. And so, naturally, that can make any investor question whether the system is rigged, the game is one of chance unless you're on the inside, et cetera. Nevertheless, I still believe you can find well-run companies, with a transparent approach to business, with a balanced interest in serving shareholders, customers, and employees. But it does take searching. Finally, I could not invest successfully with a 30-day time horizon. But what I will say because of CAPS and other experiencs in finance....I do believe there are people who can succeed with time horizons well shorter than the one I take. Foolish best.

  • Report this Comment On June 08, 2009, at 5:47 PM, TMFTomGardner wrote:

    wuff3t, here's what I think on your very fine question. I think every investor should be trained to understand what Warren Buffett has achieved and why. In a funny way, I think people should be trained that they are first answerable to Warren Buffett. So any time anyone says, "Hey, long-term investing is dead," they need to acknowledge fully what Warren Buffett has achieved through wars, threats, recessions, et cetera. From there, you should be free to innovate. As I wrote earlier, I don't think Mr. Buffett is best positioned to give investment counsel to a 66-year-old investor with no income, limited capital, medical issues, and no experience investing in the market. I won't say Buffett would give poor advice here. But I think there are certainly people with more training and deeper insights into how that person should invest. Although he does take shorter horizons, Buffett almost never speaks about how to invest if you have less than 10 years. For those with that time horizon, he is an amazing guide. Perhaps the greatest in history. But is he THE master of how to allocate capital for individuals in retirement over the next 18 months? Certainly not. This does not take away from your point. For every trader who denigrates investing in businesses, they should first have to answer to the reality of Buffett...historically AND in today's market environs. Fool on.

  • Report this Comment On June 08, 2009, at 5:47 PM, TMFTomGardner wrote:

    strnj1, of all the comments, for the pure joy of it, yours is my favorite. I hope you are enjoying every minute of the experience. The rewards of combining disciplined work, continual savings, regular investment, and perpetual curiosity are so sadly underrated in America (and, surely, around the world). It's sad how much energy is wasted going against these basic themes.....working at what you love, saving for the future, investing in what you believe in, and always hungering to learn more. You have taken these together to a place where you have all that you need, yet you walk in the motley coat of Fools. As I said, I hope you delight in it...and can spend as much time teaching others as smiling at those who assume everything but that you are prosperous in every way. Fool on.

  • Report this Comment On June 08, 2009, at 5:48 PM, TMFTomGardner wrote:

    cmr2fool, thank you for sharing your story and for the kind words. Of all that has happened at The Motley Fool since 1993, what I appreciate most is the platform we've created to let people interact with each other. Learning together is the spirit of The Fool. And so I am glad to make your digital acquaintance. Again, you have given a formula of great value -- and not to belittle you, but it is a simple formula. Avid saver + no debt + intellectual curiosity + starting early = independent wealth. I encourage you to offer yourself as a cafeteria lunchtime speaker at your local high school one day each year. As for your comments about The Motley Fool, thank you. I don't say we've nailed everything perfectly (the day I say that . . .the day any of us at The Motley Fool say it . . . is the day we begin our great decline!). We certainly can improve. And one way we can improve is to be more transparent about our business. Again, we lose money on anyone who visits The Fool and does not become a paying member. We continue to allow for that because it fulfills our mission. We also think it's the best way to build lifelong relationships with existing and potential Foolish members. That said, we do have membership services; we do believe in them; we do put tremendous labor, capital, and creative investments into them; and I do believe time will show that they generate market-beating returns. The tension in our business in this respect is that we must market these services in order to generate the capital to evolve, to survive, and to reward all three constituents of Foolishness. We will continue to work hard to make it less intrusive and more effective -- both. I am glad you embrace and understand this, and we look forward to serving you for life.

  • Report this Comment On June 08, 2009, at 5:55 PM, TravelingMel wrote:

    Have you ever noticed that TMF writes an article and at the very end is always a sales pitch to buy their product? Don't you get annoyed at TMF doing this in every article?

  • Report this Comment On June 08, 2009, at 6:03 PM, portefeuille wrote:

    see this post (including the comment section): http://caps.fool.com/Blogs/ViewPost.aspx?bpid=207634

  • Report this Comment On June 08, 2009, at 6:07 PM, TMFTomGardner wrote:

    TravelingMel, thanks for the comment. Scroll up and read a few of my notes...including the one posted right above yours. I understand your issue. And we need to do a better job of explaining ourselves. And so I am NOW committed to writing an article that explains our business to all Fools. But suffice to say that if "TravelingMel" is not a paying member of one of our membership services, we are losing money on "TravelingMel" today, tomorrow, next week, month and year...and right now, second by second, as our servers carry the weight of your clicks around the site. What you see at the end of the articles and in some of our email communications is what allows us to offer our services, which include 50+ free articles that demand training, research, editing, web design, web publishing, et cetera (i.e. not cheap). I hope when this is known across Fooldom it will be clear why we do what we do...and that you will feel gratitude that you get 99% of all of your editorial free of capital cost, free of promotion, free of anything but insight, analysis, and education (with a few jokes here or there). That remaining 1% is a typically gentle mention of a relevant service that will help us pay for tomorrow, next month, next year, and next decade. I hope you can endure the one percent of non-cash cost (promotion) in exchange for the 99 percent of free-ness. Foolish best and thanks for posting!

  • Report this Comment On June 08, 2009, at 6:10 PM, portefeuille wrote:

    America's greatest ever investor Warren Buffett

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

    do you really believe that? what great things did he do in the last 10 years.

  • Report this Comment On June 08, 2009, at 6:17 PM, portefeuille wrote:

    But suffice to say that if "TravelingMel" is not a paying member of one of our membership services, we are losing money on "TravelingMel" today, tomorrow, next week, month and year...and right now, second by second, as our servers carry the weight of your clicks around the site.

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

    this point of view is simply ridiculous ...

  • Report this Comment On June 08, 2009, at 6:39 PM, TMFTomGardner wrote:

    portefeuille, I think your question gets to the heart of a problem we have in evaluating investing talent. When you challenge Buffett's record over the last ten years, this is like saying that Haile Gebrselassie didn't run a particularly fast 100-yard dash, and therefore he's really a pretty poor runner. In fact, there are literally tens of thousands of people around the world who could run a faster 100 yards than Haile. It's a joke for Haile to even think he verges on greatness when it comes to running. If 100 yards is how you're measuring, then you miss out on the fact that Haile Gebrselassie has the fastest recorded marathon in history, at 2 hours, 3 minutes and 59 seconds.

    So you are questioning Mr. Buffett's skills when evaluating him against a sport he is not competing in. What is his sport? Lifetime investing. He started with less than $10,000 and ended up with more than $35 billion (which is very likely headed back above $50 billion).

    So do I really believe that Buffett is America's greatest investor? Yes, I certainly do. I can't speak for the last 100 yards of the race. But I can say that for the full marathon -- the sport he competes in -- he is the greatest investor. And I believe the greatest sport of all for investors is the lifelong one.

    You are free to disagree -- the beauty of The Motley Fool platform.

  • Report this Comment On June 08, 2009, at 6:40 PM, portefeuille wrote:
  • Report this Comment On June 08, 2009, at 6:43 PM, portefeuille wrote:

    Maybe he was just lucky. where have his skills gone (the sports analogy does not carry very far I am afraid ...).

    There is always one richest guy. I think he has as little talent as Bill Gates.

  • Report this Comment On June 08, 2009, at 6:51 PM, TMFTomGardner wrote:

    Portefeuille, thanks for another quick comment. You don't say why it is ridiculous to identify areas where a business loses money. Feel free to elaborate. I can give some more context as/if needed.

    Let's take a newspaper. For a long time, the papers lost money on people who simply picked up a leftover copy on the train and read it. They didn't pay. They ready the paper. The paper cost money to create, print, and distribute. The free reader cost the paper money.

    Now platforms are changing and you have a real problem for newspapers. They are trying to make money distributing content for free on the Internet, backed by advertising. Unfortunately for them, their consumers have been trained to believe that all their content online should be free.

    I presume that, like you, these folks believe that there really is no expense to researching, writing, editing, designing, publishing and providing server support to a website. Admittedly, I'm guessing at this because all you've offered is the drive-by comment, "This point of view is simply ridiculous."

    I can assure you, though, from running our business and from talking to all manner of people in the executive ranks of newspaper, magazine, and web content companies.... tragically.... the free content model is extremely unstable. It requires the endless rising of external capital to finance it....a la the Internet heyday, 1990s style.

    I wish that we all could enjoy HBO for free. I'd love ESPN for free. I would also enjoy getting everything else from an education to an automobile to home furnishings, and you name it....I'd like it for free. We have all come to expect that it is absurd nonsense to think we could get a flat screen with premium cable all for free. So we decide whether or not to pay for it.

    Over here in Fooldom, we have decided that free only works with accompanying memberships. You can call us out for being stupid. Heck, we named ourselves Fools...so we wouldn't exactly reject your right to make the assertion. How could we? That said, if you did call us stupid, after you did, we would ask you to improve upon our approach.

    After 15 years of this, I observe that I am willing to eat and then digest ridicule so long as it is followed by a series of truly brilliant lessons. So, I await the lesson. And you can expect me to embrace your topping how we do what we do. I will either embrace your suggestion and deploy the thinking here at The Fool. Or I will embrace you as a competitor, passionate about defeating our Foolishness for ever and alway.

    What I do observe is that we need to make it clearer for Fools how we are offering the things we offer; how we can afford to do so; why we do; what we are trying to achieve; how we measure our success; as well as very carefully listening to what our paying members are telling us, whether they are renewing (which they are at north of 2 times the industry's average), and what we need to be of better help to them.

    In the end, we are a community. Those of us at Fool HQ are trying every day to improve what we're doing. And one of the best ways we do is by very closely tracking the data of activity on our site. Another is by very closely listening to passionate Fools such as yourself. Enlighten me with a suggestion on how we might do better for a) our members, b) our employees, and c) our shareholders . . . and I will stand to applause, whilst preparing for a Motley Fool ballcap to be sent your way. My Foolish best and thank you for participating.

  • Report this Comment On June 08, 2009, at 7:05 PM, portefeuille wrote:

    Portefeuille, thanks for another quick comment. You don't say why it is ridiculous to identify areas where a business loses money. Feel free to elaborate. I can give some more context as/if needed.

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

    I was referring to this statement of yours:

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

    But suffice to say that if "TravelingMel" is not a paying member of one of our membership services, we are losing money on "TravelingMel" today, tomorrow, next week, month and year...and right now, second by second, as our servers carry the weight of your clicks around the site.

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

    here are my comments from my abovementioned blog post:

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

    sounds like a prostitute in the Amsterdam red light district:

    "move over if you don't want to come in"

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

    There is this concept of "potential customer" (so I thought) ...

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

    (from the comment section of this post: http://caps.fool.com/Blogs/ViewPost.aspx?bpid=208922)

    If the first comment is not "politically correct" feel free to ignore it (it was meant to be a joke anyhow) ...

  • Report this Comment On June 08, 2009, at 7:13 PM, portefeuille wrote:

    I presume that, like you, these folks believe that there really is no expense to researching, writing, editing, designing, publishing and providing server support to a website.

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

    Why should anyone think that these expenses do not exist? I don't and you can safely assume that very few do ...

    It usually costs to gain new customers and keep existing ones.

  • Report this Comment On June 08, 2009, at 7:18 PM, portefeuille wrote:

    This discussion is really strange.

  • Report this Comment On June 08, 2009, at 7:20 PM, portefeuille wrote:

    If you think it is a good idea to tell a potential customer "we are currently losing money on you" that is fine with me. I am still bewildered ...

  • Report this Comment On June 08, 2009, at 7:23 PM, portefeuille wrote:

    I think this would make a nice "welcome sign" in a supermarket:

    "Right now you are costing us money. Please grab our products and proceed to the check-out as quick as possible".

  • Report this Comment On June 08, 2009, at 7:32 PM, TMFTomGardner wrote:

    Portefeuille, I think you are taking too hard of a line here, but again, I am actually looking for a clear suggested path from you, rather than a criticism. I like criticisms up to a point. But I left the world of academia because I saw too many conflicts without an abiding interest in resolution.

    In the cases you cite, I'll say this. First, do I have a problem saying we are losing money on people who read our site for free and never become a paying member of anything? I certainly don't. That's complete transparency.

    I might have a problem with it if I followed that statement with, "And we are really angry at you. Please buy or leave quickly" (paraphrase of what you wrote). But here I may have assumed that you've read through the full list of comments on the article -- for which I take the blame.

    You will see in a comment above, though, that I actually celebrate the non-paying Fool as someone who helps us fulfill our mission and someone who is likely a source of word-of-mouth benefits for us months, years, and most importantly, decades hence.

    You may still be bewildered and/or inclined to try to make an extreme point out of this. Of course, in our open community, I accept that. However, I would much prefer a proposed clear solution. That said, this has been plenty. I've enjoyed the exchange. And now I will go in peace to serve Fools everywhere. Thanks for the comments, and if you come up with a proposed solution, feel free to drop me an email about it at TomG@fool.com. Onward.

  • Report this Comment On June 08, 2009, at 7:43 PM, portefeuille wrote:

    On June 08, 2009 at 7:39 PM, icesword2 (97.67) wrote:

    Here's where TMFTomG is flat out wrong: David Gardner states himself that the greatest value of CAPS and TMF in general is the online community, the people who research and recommend on the site for no cost or compensation. Since so much value is generated by our use of the server space, it's wrong to accuse any "freeloader" of costing TMF money every second. Sure, if I were just letting my cat walk across the keyboard / trackpad, that would be one thing, but I'd like to think I add a little more value than that. Maybe? I'll see what my cat thinks.

  • Report this Comment On June 08, 2009, at 7:43 PM, portefeuille wrote:

    I am out of this "discussion".

  • Report this Comment On June 08, 2009, at 7:59 PM, TMFTomGardner wrote:

    Porte, I think it would be a truer reflection of things, if you posted the link to your entire blog and responses on the matter. The aim is really just to get a fuller picture and there are many other replies than the one you post, yes?

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=208922&t=0...

  • Report this Comment On June 08, 2009, at 8:12 PM, portefeuille wrote:

    Porte, I think it would be a truer reflection of things, if you posted the link to your entire blog and responses on the matter.

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

    I posted the link twice (see comments made above (at 6:40 and 7:05)).

    Here it is again:

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=208922

  • Report this Comment On June 08, 2009, at 9:10 PM, stockgeek54321 wrote:

    Hi Tom

    To answer your question. In business, economic moats are not static. They either get bigger over time or smaller over time. This becomes very evident when the economy gets bad. The big fish get bigger and the small fish either get extinct or get swallowed up by a bigger fish.

    If you look at the stock market universe, its fairly easy to find companies that you know have uanassailable moats...because they've been around for a long time and they increase earnings year after year (once in a while they may stumble, but long term their earning power is very consistent). There are not a lot of companies that can do this, but its obvious who they are. The trick is to buy these companies when they are signficantly undervalued.

  • Report this Comment On June 08, 2009, at 10:18 PM, portefeuille wrote:

    If you look at the stock market universe, its fairly easy to find companies that you know have uanassailable moats...because they've been around for a long time and they increase earnings year after year (once in a while they may stumble, but long term their earning power is very consistent).

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

    You do know about a company called AIG and the story of the turkey (see here: http://blog.lib.umn.edu/perry032/impossible/and_on_the_1001s... ) I assume ...

    okay, now I am finally out.

  • Report this Comment On June 08, 2009, at 11:12 PM, stockgeek54321 wrote:

    Portefeuille

    If you can understand the fundamental difference between a company like KO and AIG, then you will understand the secret to long term investing.

  • Report this Comment On June 09, 2009, at 1:04 AM, JakilaTheHun wrote:

    I think it all depends on individual. For investors who do not have in-depth understanding of finance, accounting, and valuation, I do think that long term buy-and-hold is a relatively good strategy if implemented correctly.

    For me personally, I buy based on a lot of factors but valuation is paramount. I normally set a target price and I'm prepared to wait anywhere from 2-10 years to reach it (depending on the security). However, if I reach my valuation point within 14 months and the stock appears "overvalued" to me, I'll sell.

    I'm not sure if you call that long-term buy-and-hold or not. On the most basic level, I think about all investments from that perspective, but I'm willing to change my strategy as market conditions warrant.

    But I know a good deal about valuation and accounting. Others aren't as knowledgeable in those areas and I think they are better off finding good companies at times like right now and buying-and-holding long-term.

  • Report this Comment On June 09, 2009, at 1:43 AM, paruno wrote:

    I invested in Utilities which offered dividend reinvestment plans ;did that for 32

    years. I now enjoy a comfortable retirement,

    worry free. dividends galore!

  • Report this Comment On June 09, 2009, at 7:20 AM, CHMIII wrote:

    Because I read Tom G.'s comment and understood exactly what he meant, it's difficult for me to understand why you're having such a vehement reaction to it, portefeuille. Ignore for the moment the altuistic reasons that Motley Fool does what it does, and focus only on the business/accounting principles in play.

    The closest business analogy that comes to mind would be that of a loss leader. A business sells a product at a loss in order to get consumers into the store where they will be likely to buy something else. However, the customer who walks through the door, buys only the loss leader product and then walks out costs the company money. Even if the store sells the loss leader at cost instead of below cost, the customer who buys only the loss leader still costs the company money because of the overhead expenses that are unrecovered.

    In this case, TMF's free content - including the info contributed by members - is the loss leader. The "sale price" of this product is zero (free content), and as demonstrated above, consumers who "purchase" only the loss leader - i.e. every non-subscribing member & every guest - cost TMF money because of overhead expenses tied to operating the website and publishing free articles. Tom's statement is not "outrageous;" it's simple accounting.

    Using this model, the value of member contributions to TMF is that they help create a better quality loss leader product and thus may help get more consumers "in the door." The irony is that those same contributions may actually hurt TMF's chances of making sales; the higher the quality and the wider the extent of the free content, the greater the chances that non-paying members & guests will be happy to remain just that: non-paying.

    My two assumptions are 1) "Online advertising banners do not get anywhere near covering the cost of articles" and 2) subscription-based services are the main source of income for TMF. Since Tom G. stressed these two points, I think that they are fairly safe assumptions. Some of the assertions in other posts, including yours, are in direct disagreement with Tom's statements and seem to be making WAGs about how TMF generates income. Unless there is evidence to demonstrate otherwise, I think he deserves the benefit of the doubt.

  • Report this Comment On June 09, 2009, at 8:50 AM, henryking54 wrote:

    The problem with the Fool's business model is that the premium services are garbage. The only value to the Fool website is the free discussion boards and the free CAPS rankings. The analysts who work at the Fool aren't talented and their stock picks are no better than your mother-in-law's. This includes the Gardner brothers who have no financial training and are just marketers.

    The only real talent on the Fool website comes from non-Fool employees who contribute to the community discussion. And that talent can be read for free!

    When the loss leader is also a company's only valuable asset, your business is in trouble.

  • Report this Comment On June 09, 2009, at 9:41 AM, TMFTomGardner wrote:

    henryking54, I love the irascibility and the gruff approach. You remind me of the two old guys in the bleacher seats of the Muppets. "These guys are terrible; this theater's awful; the show was a disgrace; you're a bum; but at least I'm great."

    Because I generally prefer community participation to the on-high authority, it would be in my nature to start where you are -- skeptical of the guy at the podium. I can't say I get as tonally nasty as you did, but I sympathize with your approach.

    Your argument falls apart for me, though, because I know our hiring practices at The Motley Fool. Namely, most of the people that you've identified as bums, we've hired straight out of our community. Whether it's Bill Mann or Philip Durell or Jeff Fischer or you name it. . . these people you think are ridiculously bad...they actually came from where you are and from what you so highly praise.

    Now, true, you could say we do a miserable job of hiring the RIGHT people out of our community. The problem there is that we have a guy like Steve Kerr -- the former chief learning officer reporting directly to Jack Welch at GE -- sitting on our Board of Directors.

    Steve was responsible for training/development of leaders among the 300,000+ employees at GE. He's been invaluable for us. And so I have to say I actually think we do a remarkable job of hiring and developing talent.

    So I seek refinement in your argument. What do you think the chances are that when we hire almost entirely out of our base of 5 million monthly visitors, when we develop using methodology deployed by Steve Kerr, and when 9 out of 10 of our investment advisory services are beating the market....what do you think the chances are that you've been a little too aggressively harsh in your condemnation of all things Foolish that don't have to do with the community we've created, the CAPS system we designed, and the people we've hired actively from both areas?

    I wouldn't want to be rude, but I would want to be accurate. So I'd say the chances are pretty high that you've gone too far in your assessment. Foolish best.

  • Report this Comment On June 09, 2009, at 10:10 AM, catoismymotor wrote:

    Henryking54,

    If you are so put out with Tom ad the gang why not use some other service?

    Cato

  • Report this Comment On June 09, 2009, at 10:19 AM, sottovoce929 wrote:

    It's like the old saying: Unless you know what you are doing, Wall Street will take your money and their experience and turn it into their money and your experience.

    Using the MF four criteria, most people should be laddering T-bills and looking to get rich another way.

  • Report this Comment On June 09, 2009, at 10:24 AM, henryking54 wrote:

    <<If you are so put out with Tom ad the gang why not use some other service?>>

    Cato,

    For paid services, I do use other companies (e.g., Morningstar). Like I said, the free discussion boards here have some very intelligent non-Fool employees who are worth reading.

    Henry

  • Report this Comment On June 09, 2009, at 11:14 AM, XMFRael wrote:

    So is buy and hold dead or what?

  • Report this Comment On June 09, 2009, at 11:38 AM, henryking54 wrote:

    <<So is buy and hold dead or what?>>

    "T-bonds Beat Stocks Over Past 40 Years"

    http://www.fa-mag.com/fa-news/4031-arnott-t-bonds-beat-stock...

    Does that answer your question?

  • Report this Comment On June 09, 2009, at 11:50 AM, XMFRael wrote:

    No.

  • Report this Comment On June 09, 2009, at 11:56 AM, TMFTomGardner wrote:

    Henry, thank you for joining in the discussion. I am a fan of Morningstar. You can confirm for me, though, if they report returns according to your standards. Now, we are working toward improving our reporting quality. One of the biggest steps we've taken in that direction is just to invest our own money behind services. That makes tracking pretty easy. I'm not sure of other membership services that invest their own money behind their ideas (and do so after giving all members a chance to transact). Another way for you to evaluate our services is to go to the grandaddy of reporting standards -- Mark Hulbert -- and I think you'll find his work confirming that we're adding a lot of value. One final metric is the renewal rates of members which run two times higher than the industry average for investment newsletters.

    I'm guessing from your perspective that you're best suited for TMF Pro and Jeff Fischer. Jeff deploys options in a conservative, prudent, productive manner. He uses hedges. He is beating the market by all tracking methodologies. And he's doing so with reduced volatility. It is very early in the service, but I'm guessing you would really enjoy it.

    And if you choose not to become a member, I hope you continue to enjoy our hard work every day for free. Further, I hope you are finding happiness with your investments and in your life everyday, Fool.

  • Report this Comment On June 09, 2009, at 12:51 PM, henryking54 wrote:

    <<I'm guessing from your perspective that you're best suited for TMF Pro and Jeff Fischer.>>

    TomG,

    See my June 8th 8:34 AM post.

    Henry

  • Report this Comment On June 09, 2009, at 1:04 PM, portefeuille wrote:

    <<I'm guessing from your perspective that you're best suited for TMF Pro and Jeff Fischer.>>

    TomG,

    See my June 8th 8:34 AM post.

    Henry

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

    It's sad, so sad

    It's a sad, sad situation

    And it's getting more and more absurd

    ( http://www.youtube.com/watch?v=J2e4NlnLr28 )

  • Report this Comment On June 09, 2009, at 1:06 PM, portefeuille wrote:

    thanks for the laugh by the way!

    (and out again)

  • Report this Comment On June 09, 2009, at 1:12 PM, dp23peace wrote:

    "The problem with the Fool's business model is that the premium services are garbage. The only value to the Fool website is the free discussion boards and the free CAPS rankings. The analysts who work at the Fool aren't talented and their stock picks are no better than your mother-in-law's. This includes the Gardner brothers who have no financial training and are just marketers. "

    Maybe to you on your high horse these services are garbage, but to someone new to investing they are invaluable. I first tried a few free trials, read their book, invested a little, and then reevaluated what my strategy was going to be and cancelled the ones that didn't fit. I don't go along with every foolish pick because I don't like companies with debt, etc. and sometimes they pick some that do have debt. However, most of my picks are from the scorecard of either Rulebreakers or the flagship service and here's why. Again, for a beginner it's hard to keep up with a company and can be exhausting trying to do so. With the service you get updated on how things are going and learn from these updates. Eventually I plan to venture out and use what I have learned to make my own picks via some Peter Lynch style investing (picking what's around me), but for now I will enjoy the 42% rise in my portfolio this year and learn from the premium services.

    I also feel that as much as I have gotten from the site for free I had more than made my money back and treated my membership as a "donation" that will enable them to continue free services they provide.

    Now that I am convinced of my strategy I just ignore the ads at the bottom of the articles. It's really not that hard to do.

    Finally, Tom I am more impressed now than ever that you are willing to be so responsive and transparent. Truly impressive and consistent with your stated mission.

    Peace.

  • Report this Comment On June 09, 2009, at 1:16 PM, TMFTomGardner wrote:

    Henry,

    I'm sorry to hear you have such profoundly negative feelings -- and about virtually everything we do. I find it hard to learn from the extremes. The best input I've gotten comes from those who have a wish list of changes. Now, that said, I certainly have organizations that I won't do business with -- and for whom, therefore, I have created no wish list. But if I spent a lot of time at an online service, participating actively, I would start by recognizing that there must be a lot of good going on to attract so much of my time and attention. And then I'd begin building my wishlist. Sadly, I'd expect that most companies would make it very difficult for me to share my wishlist -- they aren't community-driven. But given the opportunity, I'd share that list. If I found myself so disenchanted that I spent much of my time with that service grumbling and frowning, punching my computer keys intensely, and grimacing, gritting my teeth, and did I mention frowning? I'd look for other services. Of course, I hope this isn't your daily experience with The Motley Fool. But it certainly does feel like it. I hope there is a spring in your step otherwise and that you're investments are flourishing. I'm sorry we haven't created a membership service that earns anything but your extreme, all-out, everywhere, always, apparently forever, and all-encompassing displeasure. I am happy, though, that we maintain a forum where everyone can share their opinions. . . no matter where they fall on the continuum 'twixt delight and displeasure. I hope you find many other places and people and organizations to spend time with that share your values and views. Likewise, of course, we will spend most of our time helping the people that are happy to be here, curious, engaged, and focused on improving their portfolio and improving The Motley Fool. Onward and upward.

  • Report this Comment On June 09, 2009, at 1:22 PM, dp23peace wrote:

    Sorry, I mistated my portfolio's performance to date. It's up to 43.17% now. I hate these premium services. ;)

  • Report this Comment On June 09, 2009, at 2:02 PM, wuff3t wrote:

    TomG,

    I would just like to congratulate you on your admirable restraint. I'm not sure I'd have had the patience you've displayed over the last 2-3 days...

    And to anyone questioning TMF's integrity, you might like to ask yourself how many other co-owners of a business would apply as much effort as Tom has to try to communicate with you. Doesn't that rather fly in the face of the idea that TMF just wants to take the money and run?

  • Report this Comment On June 09, 2009, at 4:58 PM, Deepfryer wrote:

    I agree with wuff3t. This site isn't perfect, and there is nothing wrong with criticizing TMF from time to time... but certain people here are going a little too far flexing their "internet muscles" - I doubt they are so rude and disrespectful in real life. Props to TomG for the way he has handled the situation.

  • Report this Comment On June 09, 2009, at 5:01 PM, MaxPower13 wrote:

    wuff3t, I could not agree more. Tom, I am thoroughly impressed with your responses. I have more faith than ever in the MF, and I've already been telling people for a few years that I wouldn't invest without the MF. After everything you just put up with... if you're ever in Albany, NY, please let me buy you a beer.

  • Report this Comment On June 09, 2009, at 6:24 PM, ReadEmAnWeep wrote:

    TomG,

    First of all I want to say that it is awesome you are on here commenting with people. When I posted I thought it was going to be one lost in the online beyond.

    I thought that this article was going against what I read in your books. As someone still young and new to investing I felt betrayed because I thought you were taking a hypocritical stance (Since so many other people are since last fall). I thought you were selling day trading or something like that. I guess I felt betrayed becuase like I said I liked your book. I am new to investing and TMF is where I go to try to learn. But after re-reading your article and the posts before/after mine. I reallize I was wrong. Your article makes perfect sense.

    It does not make sense to blindly buy and hold on to a sinking ship.

    People on here have some very good ideas. Others just seem angry at life. But hang in there!

  • Report this Comment On June 09, 2009, at 9:40 PM, KnightTrader4u wrote:

    TomG - Kudos to you for being so open about your business model and motives. You make a great point about people spending so much time on site and feeling so incredibly negative about it. I ask "WHY". Why not spend my time some place i enjoy...unless this is truly a place i enjoy.

    Keep up the great work. I had a few ups and a few downs but that is life. I have learned, i have been empowered and i am patiently waiting for that 10 bagger and the day i can sail off into the sunset!

  • Report this Comment On June 09, 2009, at 9:43 PM, KnightTrader4u wrote:

    But i must ask how have we digressed so far from an interesting topic?

    http://www.youtube.com/watch?v=KDHvtuCGeaw

  • Report this Comment On June 10, 2009, at 12:18 AM, BigFatBEAR wrote:

    TomG,

    Great article!

    It's great to hear from one of the heads of Fooldom, I heard a lot of wisdom in your words, and especially a lot of patience in your responses to commenters.

    As a person who has found relatively little of value on most of the Fool's daily articles, but TONS of value on CAPS, I would encourage/challenge the Motley Fool, and you personally, to focus more time and energy there. We need you! I'm not sure how many CAPSers missed this article, but if GMX hadn't pointed me to it, I probably wouldn't have seen it. Why not update your CAPS blog with a copy of this?

    Anyway, thanks again for the well-written article. I'll be looking to know myself better, and have a stronger stomach for the long-term. I'll also try to poke around the Fool.com site more, but I'm still fairly convinced that Fool articles have seen their glory days. They just don't make them like this anymore:

    http://www.fool.com/dtrouble/1999/dtrouble990514.htm (http://tinyurl.com/nfa6eu)

    -BigfatBEAR

  • Report this Comment On June 10, 2009, at 2:35 AM, lowmaple wrote:

    First I do believe in BUY + HOLD However saying that your PRO holdings are up 10 % since coming out of the worst drop in years is not surprising as (i am NOT trying to boast ) but my stocks I bought are up more than that over that time since there was a fire sale going on. I'm certain others have even done better.

  • Report this Comment On June 10, 2009, at 4:29 PM, McCrikey wrote:

    Great news! Now I can stop wasting my time here.

  • Report this Comment On June 10, 2009, at 8:48 PM, KnightTrader4u wrote:

    Of course all the PUNDITs are saying that 'buy & hold' is now dead. It's easy to knock buy & hold strategy when the current 'hold' experience involves watching your investments DROP by 40%. OUCH that hurts, for sure...kind of like stubbing your toe in flip flops.

    Does this mean that buy & hold dead? Heck no!

    Equities have been the best asset class to own over the long term, and I don't believe that will change.

    Maybe its time people think about BUY and HOLD with some hedges to dampen volatility!

  • Report this Comment On June 10, 2009, at 9:31 PM, KnightTrader4u wrote:

    Will Buy and Hold Philosphies Still Work?

    My bet is stocks, ETF’s, and index funds will remain the way to grow personal wealth and get the best returns. Some variation of buy and hold will be successful possibly the BUY to HOLD you hear mentioned on this site....(but not holding forever).

    The death of buy and hold has occurred ....I mean buying and holding the general U.S. stock market indexes. This US FLAG WAVING wealth building strategy isn't relevant any longer. This is the brave new world. These noble institutions have fallen.... The US indexes have performed well over the long periods of time due to the following factors:

    - breakthroughs (fertilizer, cars, planes, the computer, the Internet)

    - a flood of investors and money flowing into the markets

    - rapid inflation due to massive amounts of credit passing hands

    There is no sustainability in all these areas. They are tapped.

    This brave new world is influencing mr. market. He is controlled by the cnbc 24 hour market hype machine and hedge funds. The common folk ....us individual ‘buy and hold’ investors are getting slaughtered.

    Here's My New World Plan On Investing

    Buy on Fear - Buy beaten down market sectors at the point of most intense fear and selloff. This will be done mostly through ETF’s, and occasionally a stock or two.

    Sell on Greed - Sell these sectors when they are up (beyond fair valuation) and a healthy amount of greedy, return-chasing investors jump in.

    Yo, wake up I’m not talking about day trading or even monster trading here. What I’m going to do is invest in sectors based on where in the growth and decline cycle that sector is in.

    What’s this going to require?

    Money Honey - Access to cash

    Reading, writing and Education on how to fairly evaluate a market sector and where it’s at in it’s cycle. - one has to know what they are looking for and how to spot it.

    Patience young grasshopper - like hunting its a waiting game.....sometimes you wait for hours for the big game.

    A deaf ear - the ability to stop listening to the masses, go against the grain be a contrarian

    A serious time commitment. Like hunting again i have to scout my position or i am wasting my time and its pure luck, pure chance.

    A lot of heavy lifting....the work has to get done, the studying, a deep understanding of the macro influences.

    Like My Friends Rage Against The Machine Once said:

    In these days when statues of old men

    Crash down to the ground, the old order has gone

    Nothing's like it was and chaos everywhere

    From this ruins will grow a new chance for the world

  • Report this Comment On June 10, 2009, at 10:12 PM, DamsR2008 wrote:

    I put in a lot of money into the market this year with the hope that it is a good opportunity to risk thus yielding 42% unrealized profit so far. No matter what ....I am going to SELL all/most of my stocks 7 YEARS from now i,e during 2016.

    Why?

    My belief is that every 7-8 years markets seem to crash for some reason or the other. It may sound foolisg but I am a FOOL!

  • Report this Comment On June 10, 2009, at 11:07 PM, spongeLarry wrote:

    Sooo... DamsR2008 appears to reject buy-n-hold, as do I.

    Now KnightTrader4u claims to "believe" in buy-n-hold and then proceeds to describe a short term market timing strategy... If you're the poster boy for buy-n-hold, I rest my case.

    TMFRael, thanks!! I realized a lot from your comment, and yes, I knoweth myself too.. that is, I CANNOT handle 10 years of zero returns.

  • Report this Comment On June 11, 2009, at 9:40 AM, pberardi wrote:

    What the heck am I suppossed to do with my 100 shares of ABT that pays a steady dividend or PG that is one of the greatest companies in the world?

    Seel them after they go up 20? Ignore their great dividend history and sell?

    What am I suppossed to do with my Vanguard Total Market Index fund? Sell it after it goes up 20%. How the heck do you value an total market index fund anyway?

    No, I hold these investment for a lifetime and add to them during bear markets or major corrections like 10%.

    What we really should be discussing is asset allocation. People, including professional money managers can't manage risk. They really don't understand risk nor do they recognize the impact of risk when a bear market like this happens.

    Perhaps the model of 100% stocks if you're 10 or more years away from retirement is flawed. Perhaps we've become to ingrained to believe that stocks deliver 10% return over the long run.

    Perhaps a balance of 50/50 stocks and fixed income gets us where we want to be. Did it ever occur to anyone that investing also includes saving and principal as oppossed to simply CAGR or rate of return?

    You can dramatically reduce risk by saving more (Principal) thus requiring less R (rate of return)

    If I buy a chinese micro cap and it goes up 55% in 3 months, will I seriously think about selling? you bet.

    If I buy ABT and it goes up 55% over 3 years will I consider selling? If the fundamentals have not changed and the company is creating shareholder value as it always has...no way do I sell

  • Report this Comment On June 11, 2009, at 9:42 AM, TMFFischer wrote:

    lowmaple: <<First I do believe in BUY + HOLD However saying that your PRO holdings are up 10 % since coming out of the worst drop in years is not surprising as (i am NOT trying to boast ) but my stocks I bought are up more than that over that time since there was a fire sale going on. I'm certain others have even done better.>>>

    Hi lowmaple -- as with much in investing, context helps. To provide some: the Pro portfolio started with $1 million in October, and is investing gradually, with longs, options, shorts and hedges. Today, it still holds about $655,000 cash, and its 10% cited return is measured on the whole $1 million value of the port. So, many stocks in the port are up 30%, 40%, 50%; the invested part of the port has had this sort of return. Since the inception date, the whole port (with cash) has created twice as much value as the S&P while still being heavy in cash (cash is great in down markets, of course, and a relative weight in strong markets -- but we won't rush our investing by any means). Finally, our largest goal in Pro is absolute or positive returns in up, down and flat markets (creating mostly near-term gains via options and longer-term gains in stocks), and to close at least 75% of our positions profitably when we close them. Pro is young (though I've been using these strategies for many years), but so far, so good. And we're Fools, so we're enjoying it. :-) Thanks for your post! --Jeff, MF Pro

  • Report this Comment On June 11, 2009, at 9:53 AM, galtline wrote:

    I don't believe buy and hold is dead...it's just...um...sleeping. Buy and hold is tired and needs some rest (having so many bull markets and an economy propped up by debt is just exhausting).

    Fundamentally, I've still been investing in companies with strong cash positions, a deep moat, and little debt (an important part of the equation, currently). If the market goes down, I continue to put money into them (averaging down). When the market runs up, I sell some. This way, I've been steadily gaining ground and accumulating more stock. Yes, I'll bite the bullet come tax time, but there are ways to mitigate that some...and I feel that the gains that I've received (and plowed back into the market at the right times) have been worth it.

    At some point, I'll let those stocks ride...but not yet. Either way, I'm never "all out" or "all in", so I'm in a good position no matter what the market decides to do.

    Both investing (buy and hold) and trading require a stomach for volatility. Investors are willing to ride the market down (knowing that it will come back up). Traders are willing to risk "missing" the ride up.

    Economics is playing a much larger role in investment strategy than it has before, so I've adjusted my thinking accordingly.

  • Report this Comment On June 11, 2009, at 10:30 AM, outoffocus wrote:

    I think the fatal flaw with the typical "buy and hold" methodology is that retail investors believe "buy and hold" means "buy and hold" indefinitely. Then they tout Warren Buffett as the example of this strategy. But the problem with this argument is Warren Buffett has controlling shares in most of the companies he holds. Therefore he actually has some say into the operation in the company, whereas the typical retail investor does not. Also, Warren Buffett does not just buy a company and just hold it. He looks for companies with good fundamentals and buys them cheap. Then if the price appreciation exceeds fundamentals he sells for a profit.

    Retail investors on the other hand don't generally have a say in company's management decisions. This puts EXTRA RESPONSIBILITY on the retail investor to do his/her due diligence on the particular security they want to buy. This due diligence does NOT END once the security is purchased. The retail investor must evaluate the security on a PERIODIC BASIS to determine if that security is still as good of an investment as it was when initially purchased. The retail investor must evaluate the current fundamentals of the security and determine whether current management decisions are in the BEST INTEREST of the company in the long term.

    Then and only then will the retail investor be successful in their buy and hold strategy.

  • Report this Comment On June 11, 2009, at 11:53 AM, TMFtheEdge wrote:

    My opinion is that "buy and hold" will remain a valid concept to great wealth of the multi-bagger variety ... for the right businesses.

    While the idea of finding that one business which would change your financial standing forever sounds enticing - perhaps, the most devilishly difficult issues would be which business/industries to "buy and hold"?

    Clearly not every business is suited for "buy and hold".

  • Report this Comment On June 11, 2009, at 4:59 PM, Royzer wrote:

    Buy and Hold makes sense to me, but as a novice, what I want to know is: Hold until WHEN? It seems logical that wise investing will yield good results over the long-term, but at what point do you get to reap the rewards of your investment? And if you don't cash out those paper gains, how has your success made a tangible improvement to any material aspect of your life? Or is investing just "entertainment" for people who have large amounts of disposable income?

  • Report this Comment On June 11, 2009, at 9:01 PM, horsesense101 wrote:

    Hi Royzer

    "Or is investing just entertainment for people who have large amounts of disposable income?"

    Thanks for the belly laugh!!!

  • Report this Comment On June 12, 2009, at 9:14 AM, McCrikey wrote:

    What this boils down to is the Fools are for capitalism and long-term investing unless the market collapses and then they're for national socialism (bailouts) and short-term investing.

    The only question I have is whether they are simply opportunists or they just recently became philosophically bankrupt.

  • Report this Comment On June 12, 2009, at 10:15 AM, ScottieWP09 wrote:

    There is no true alternative to a long term, buy and hold strategy while minimizing total costs and taxes. It seems that long-term investing's definition has changed. Ok, so the S&P had a slightly done decade. It happens. Look at history and you will find very few flat or down decades. Stocks remain the best way to build long term wealth and will continue to be so in the future. Invest for the long term, at least 1 year out, to minimize short-term capital gains, and above all minimize your costs (brokerage, adviser, expense ratios, transcation).

    We all know that 80% of mutual funds don't beat their index. What makes any individual investor think they can consistently beat the market? Sure, you can get lucky with individual stocks but diversification necessitates you own at least 50 individual stocks, which for most individual investors generates high trading costs and eats returns. After reading A Random Walk Down Wall Street, Common Sense on Mutual Funds, and other literature I am a strong believer in the indexing approach. Be an investor, not a trader. The first generates wealth for you, the other for your broker.

  • Report this Comment On June 12, 2009, at 10:28 AM, portefeuille wrote:

    Haven't any of you very smart people read Pat Dorsey's "Little Book That Builds Wealth?"

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

    Why would anyone read a book of that this title?

  • Report this Comment On June 12, 2009, at 10:29 AM, portefeuille wrote:

    Why would anyone read a book of that this title?

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

    Why would anyone read a book of that title?

  • Report this Comment On June 12, 2009, at 1:08 PM, Ironbob wrote:

    This entire article is written to sell you a service and that is all.

  • Report this Comment On June 12, 2009, at 1:32 PM, TerryEJarvis wrote:

    Yes, the rules are different for some stock and the same for others. Some will stay the same: Coke, McDonalds, chemicals, minerals, energy, communications and others will be around for the foreseeable future. (That is providing the CEO does not pull an Enron and trashes the company).

    I like Dividends. It is like playing the game Monopoly. Forget about houses or hotels, just collect property that pays rent. There is your cash flow to buy more. Houses/hotels are dividends going up, you just get more for your cash flow. That is how to win that game. Always diversify and buy low/sell high.

  • Report this Comment On June 12, 2009, at 2:26 PM, Biggermime wrote:

    Buy and hold clearly works, but only if the company is not headed down the tubes. General Motors and Kodak, for instance, gave years of warning that things were not going well. "Buy and hold is" different than "Buy and forget"

  • Report this Comment On June 12, 2009, at 2:36 PM, coolnewbie wrote:

    @ Ironbob and many others who have been bashing TMF...

    If you folks have the expertise or the knowledge that's necessary to identify the mutlibaggers I don't see a point in why you would even want to waste your time in debating whether this article has been written to sell a service or offer advice to the newbies, like me.

    For people who are new to the world of investing I hands down will recommend TMF without blinking an eyelid. If they are using a particular approach, and the CEO TMFTomG has been transparent in sharing his approach, I don't see why anyone should have a problem with that. That's just plain foolish, IMHO. I know others will disagree and just like Tom has mentioned, this is a platform to agree to disagree. So if its not worth your while to even read the articles what TMF has to offer for free (while conveniently ignoring their ad's for subscription memberships), please by all means look elsewhere.

    Based on my experience, I have been subscribing to the HG and used to subscribe to the Pay Dirt service when it was initially launched. I can't think of one company from the myriad of others that sell the "services" who will come back to their subscribers and say "Dude, we screwed up with one service, so we are willing to offer you a free subscription to another one, without asking you to pay a penny". TMF did that and they offered me a free subscription to Motley Fool PRO for a full-year, mind you after it was more than 9 months into the subscription for Pay Dirt, wherein they were just obligated to enjoy the PRO membership for just 3 months based on my initial subscription to Pay Dirt.

    I'm sure this comment will set off another wave of debate, but I have benefited a lot from being a member of the community here at TMF and thanks to you guys, I have gotten quality knowledge in the form of subscribed services and from the Fool boards.

    And yeah, i'm in no way related to anyone at TMF, just a happy customer, before you hawks out there start nitpicking.

    Three cheers to the TMF team!! Fool on!

  • Report this Comment On June 12, 2009, at 2:37 PM, coolnewbie wrote:

    @ Ironbob and many others who have been bashing TMF...

    If you folks have the expertise or the knowledge that's necessary to identify the mutlibaggers I don't see a point in why you would even want to waste your time in debating whether this article has been written to sell a service or offer advice to the newbies, like me.

    For people who are new to the world of investing I hands down will recommend TMF without blinking an eyelid. If they are using a particular approach, and the CEO TMFTomG has been transparent in sharing his approach, I don't see why anyone should have a problem with that. That's just plain foolish, IMHO. I know others will disagree and just like Tom has mentioned, this is a platform to agree to disagree. So if its not worth your while to even read the articles what TMF has to offer for free (while conveniently ignoring their ad's for subscription memberships), please by all means look elsewhere.

    Based on my experience, I have been subscribing to the HG and used to subscribe to the Pay Dirt service when it was initially launched. I can't think of one company from the myriad of others that sell the "services" who will come back to their subscribers and say "Dude, we screwed up with one service, so we are willing to offer you a free subscription to another one, without asking you to pay a penny". TMF did that and they offered me a free subscription to Motley Fool PRO for a full-year, mind you after it was more than 9 months into the subscription for Pay Dirt, wherein they were just obligated to enjoy the PRO membership for just 3 months based on my initial subscription to Pay Dirt.

    I'm sure this comment will set off another wave of debate, but I have benefited a lot from being a member of the community here at TMF and thanks to you guys, I have gotten quality knowledge in the form of subscribed services and from the Fool boards.

    And yeah, i'm in no way related to anyone at TMF, just a happy customer, before you hawks out there start nitpicking.

    Three cheers to the TMF team!! Fool on!

  • Report this Comment On June 12, 2009, at 2:38 PM, BoctorBill wrote:

    Most investors, myself included, have no liquid money for investing with. We are tied to what our 401(k) or IRA investment choices give us. There's not a spare dime in my take-home pay that I can use to invest.

    Individual stock assessments and portfolio management, like it or not, are a wealthy player's game. I have neither the time nor ability to make investments of this nature. This idea basically says everyone needs to act as his own stockbroker. Fine, do that if you're loaded with money and free time.

    I have managed my retirement portfolios pretty well, moving a large percentage of my nestegg out of volatile funds into less volatile funds, keeping my losses low, even growing some of my accounts. I did this against the advice of my financial planner, who now praises the strategy. Recently I re-balanced the portfolios, moving back into investment mode.

    Most folks didn't do this - the buy and hold 401(k) strategy killed their bottom line. But you CAN exert some useful control in a buy-and-swap mechanism.

    As far as my financial planner, well, he's actually pretty good at it, and he helped me turn around my devastatingly poor investment choices of the 80's and early 90's. I could never have made these smart choices without his tutelage.

  • Report this Comment On June 12, 2009, at 2:42 PM, coolnewbie wrote:

    @ TMFTomG

    Tom, your patience and resilience in handling these comments have taught me a good lesson in how to take criticism head on. Its truly admirable for you to devote the time and share TMG's approach to keep content free while ensuring that you advertise the services you have to offer.

    A BIG "Thank You" to you and your team and hope you guys will continue to keep portions of TMF free for non-subscribers.

    Coolnewbie

  • Report this Comment On June 12, 2009, at 2:50 PM, smtyou wrote:

    My account balances are proof for me that long term investing works. You only have to use common sense when selecting companies or funds. I think traders are passing around the rumor of long term investing follies to prop up their own failed trading practices. It's always fashionable to knock long term investing in a bear market.

  • Report this Comment On June 12, 2009, at 2:51 PM, georgetag wrote:

    I don't know if long term investing works. I'm just listing to you Fools. I hope you guys know what you're doing.

  • Report this Comment On June 12, 2009, at 3:16 PM, salvadorveiga wrote:

    AGAIN I POST IT HERE

    Buy and Hope is what I call it... Why go against the main trend?

    Buy and hold is good AS LONG the trend is in your side... I've been stating this over and over again...

    I've said this in MDP boards, in which I was a subscriber... I got rid of the few positions I had and managed to not only avoid losing money as well I made a lot by shorting some stocks...

    Why people try to buy and hold I cannot understand... if there's a bull, there's lot of money to be made ! I rather lose the first 20% or 30% run up and enter once the trend is up with confirmation than trying to guess bottoms...

    A simple method of moving averages from 1969 to 2009 beat the S&P 3-to-1 ... go check my CAPS blog...

    By only using moving averages an investor only investing in S&P index fund would've gained 2450% more or less while the buy and hold approach? around 800%.

    Also I see a lot of the arguments behind buy and hold is: "historically we're cheap... historically if we keep buying we beat the market.... historically bla bla"

    For how long have those statistics been from ? From 1930's on probably... I want to see once a really big bear market comes in... do you think the 70's or the 2000-2003 bear was big?

    This one will be bigger in my opinion and one to be in history books... S&P 300 points more or less..

    Even if one doesn't believe why not just follow the simple moving average system?

    Isn't it better to enter near the bottom or more conservately and exit near the tops than watching our equity vanish while someone holds and hopes in the midst of a bear?

    Please... have some sense.

    ALSO SEE MY CAPS BLOG:

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=211301&t=0...

  • Report this Comment On June 12, 2009, at 3:20 PM, salvadorveiga wrote:

    By the way TomG, great you have the time to answer posts here on your public article yet in MDP you haven't set your feet in there pretty much since the beginning of the service... I was a subscriber and I never saw ONE SINGLE POST there from you...

    Supposely you are the face of MDP and its leader, and yet you were nowhere to be seen...

    I'm saying this because it was something that was debated a lot there...

    Best wishes

  • Report this Comment On June 12, 2009, at 3:23 PM, philis50 wrote:

    If you have a 20 year bull market and you invest at the begining of it, it works just fine. If you happen to invest at the bottom of a bear market, you will do just fine.

    If you play the fool for wall street (buy and hold) you will go broke.

    Ask those people in their 50's and 60's what they think of buy and hold after the past 2 years.

    This is unique? CRAP!! Ask the people that were 50-60 in 2000 what they thought of buy and hold.

  • Report this Comment On June 12, 2009, at 3:44 PM, silverbare wrote:

    Smart market timing is crucial to long term investing.

    Check out the url below by Fool member Doug Short. Would you have missed the meltdown if you had followed this simple methodology? I did. Maybe you only want to allocate part of your assets to this timing strategy. No matter, traditional buy and hold is over for me.

    http://dshort.com/articles/SP500-monthly-moving-averages.htm...

  • Report this Comment On June 12, 2009, at 3:49 PM, RaptorD2 wrote:

    Hi Tom,

    Sorry but this argument is silly because as you know there is no right answer. In fact, the only one whose opinion is wrong, is the person who is inflexible and insists their answer is the correct answer.

    If someone tells me that there is only one way to do something, it's time to insert the ear buds.

    Whatever works for each of us is, by definition, "correct."

    That was easy. :)

    Dan

  • Report this Comment On June 12, 2009, at 4:04 PM, jgneuw wrote:

    For me personally, long term now has become approx 10 years max. So, I am starting to sell off the highest gains within my stock port. I am holding the foreign stocks based on other currencies and some of the Fool reccoms that look like value companies with a future(?)

    I am buying gold as an inflation hedge because I think that we are in for a rough ride ahead. Oh, and I also don't have much regard for our currency value on world market over the next 10 or so years.

    Would welcome any comments from Fool experts as well as others who might see things a little different.

    -----JG

  • Report this Comment On June 12, 2009, at 4:09 PM, McCrikey wrote:

    RaptorD: The only person whose position is consistently wrong is the person who says there is no right or wrong.

    Murder, torture and genocide to name just a few are wrong even though numerous people have tried to make them work.

    You really should crack open a book on philosophy some time, read a little on "Pragmatism" by William James and figure out what a dead end it is.

    You've disqualified yourself from serious considerations.

  • Report this Comment On June 12, 2009, at 4:10 PM, mrmok wrote:

    Logically, part of buy and hold, is to buy low and sell high, so it isn't necessarily buy at any price, and hold till it's worthless, so it is somewhat of a misnomer. I've sucessfully used bothe the foolish approach on my own with mixed results and the Foolish approach with MF products with excellent results, (unsolicited)

    Mark

  • Report this Comment On June 12, 2009, at 5:03 PM, actuary99 wrote:

    Can people quit whining about losing money on their retirement fund? If you are near retirement and you lost a huge percentage of your portfolio value recently, you were already playing with fire and should have known you were at risk for getting burned. Quit exptrapolating your personal experience to the rest of us.

  • Report this Comment On June 12, 2009, at 5:11 PM, martinfool wrote:

    My only comment is I'm getting SO TIRED of these articles with sensational headlines which end up being a shill for a Fool service!

    Just advertising. I'm seriously thinking of dropping my Foolish membership. If I wanted a Financial service shill in every article, I can go elsewhere.

  • Report this Comment On June 12, 2009, at 5:22 PM, kev53 wrote:

    I agree 99.

    I am sick and tired of all those people who whine about how their investments have lost value and their dreams of retirement have been shattered. This happens every time we have a recession. And every time this happens the market recovers. So STOP WHINING and LEARN HOW TO PLAY THE GAME.

  • Report this Comment On June 12, 2009, at 5:42 PM, niplah wrote:

    The buy and hold philosophy can be useful if one adjusts to the reality of change. If one adjusts to the changes occuring in the environment as they affect companies, one can sell when changes are likely to affect a company's profit. Having sold most holdings in 2007 secured a cushion. Having partially reinvested before the bottom was my own fault.

  • Report this Comment On June 12, 2009, at 5:57 PM, daharkleroad wrote:

    I opt for a modified buy and hold. There is no reason to sit around and wait for 10 years for a stock to finally begin to move again. Keeping track of the stock while putting the funds into a ETF or Mutual and making a few percent per year is prefered. When you see signs of life, dump the proceeds back in and continue with the buy and hold. This takes some disipline to constantly check up on the stock in question and to re-enter with as much or more then the withdrawl.

  • Report this Comment On June 12, 2009, at 6:34 PM, RVerbalKent wrote:

    I'm no longer convinced a lot of the old formulas still apply. It used to be expensive and somewhat difficult to buy individual stocks or Mutual Funds (Compared to today) and thus people were more inclined to buy and hold. Now that any Tom, Dick and Harry can buy and sell stocks and Funds in seconds for a couple of bucks the whole philosophy has dried up. Not to mention that many corporate stalwarts used to be "invincible" to competitors but now with so many more avenues for market penetration, not to mention Foreign competitors, that isn't really the case anymore either. Who knows, I guess I just had a bad decade, but when your $$$ is worth less dollar for dollar not even counting for inflation after an entire decade, well the formula does look a little off.

  • Report this Comment On June 12, 2009, at 7:09 PM, Bingstone wrote:

    Whenever I saw an ad about how they have done much better than SPY, I immediately close the web. I simply do not believe it. Please do not put this ad in your articles:

    "Since 2002, David and Tom Gardner have returned 32.05% while the S&P 500 returned -8.60%."

    Thanks,

    Bing

  • Report this Comment On June 12, 2009, at 7:29 PM, salvadorveiga wrote:

    Buy and Hope is what I call it... Why go against the main trend?

    Buy and hold is good AS LONG the trend is in your side... I've been stating this over and over again...

    I've said this in MDP boards, in which I was a subscriber... I got rid of the few positions I had and managed to not only avoid losing money as well I made a lot by shorting some stocks...

    Why people try to buy and hold I cannot understand... if there's a bull, there's lot of money to be made ! I rather lose the first 20% or 30% run up and enter once the trend is up with confirmation than trying to guess bottoms...

    A simple method of moving averages from 1969 to 2009 beat the S&P 3-to-1 ... go check my CAPS blog...

    By only using moving averages an investor only investing in S&P index fund would've gained 2450% more or less while the buy and hold approach? around 800%.

    Also I see a lot of the arguments behind buy and hold is: "historically we're cheap... historically if we keep buying we beat the market.... historically bla bla"

    For how long have those statistics been from ? From 1930's on probably... I want to see once a really big bear market comes in... do you think the 70's or the 2000-2003 bear was big?

    This one will be bigger in my opinion and one to be in history books... S&P 300 points more or less..

    Even if one doesn't believe why not just follow the simple moving average system?

    Isn't it better to enter near the bottom or more conservately and exit near the tops than watching our equity vanish while someone holds and hopes in the midst of a bear?

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=211301&t=0...

  • Report this Comment On June 12, 2009, at 7:37 PM, salvadorveiga wrote:

    I'm not American.

    I'm from Portugal and I was lucky enough to start investing in 2003 at the bottom.

    At the time I was 14 more or less...

    I am also fortunate that probably one of great minds in investing and is certainly right wrote a book and only in Portuguese...

    Why fight the trend I ask ?

    People, there's no need trying to guess bottoms or tops...

    This portuguese investor simply states that one should only enter the market once the trend is in our side... and step aside when we turn Bearish... or if you're more aggressive go short.

    I've demonstrated here that a Simple moving average play would beat the S&P 3-to-1 and I am only talking about S&P index... meaning just buying SPY for example...

    From 1969 to 2009 only 11 signals were issued. 10 winners and 1 minor loss...

    Wouldn't it be better when these signals are aligned then we can jump in and buy all the good companies back?

    Those same dollars from the companies you sold when the signals said to sell now could buy a whole lot more shares !

    Investing is not hard... people make it hard. Buy and hold to me is not the way to go... buy and hold yes as long as the trend remains intact... once it breaks just sell everything and get back in once it returns back up...

    I would rather lose a initial 20 or 30% rise from a start of a bull, that trying to pick bottoms and being wrong over and over...

    Again from 1969 that approach delivered 2400% while buy and hold delivered 800%+ for S&P...

    Now imagine, how much more of 2400% would it be if instead of buying and index fund, once the signal triggered you'd buy the good companies. I bet you probably would beat those 2400% by 2 or even 3 times!

    Buy and Hold yes, as long as the trend is in our side...

    Read more:

    http://caps.fool.com/Blogs/ViewPost.aspx?bpid=199470&t=0...

  • Report this Comment On June 12, 2009, at 8:18 PM, tokyovoice wrote:

    I've been a subscriber to HG, RB, GG and now MDP over the past 5 years or so. I bought and held recs by these newsletters. I lost about 50% of my portfolio along with everyone else. But I kept adding money as the markets were falling (too early, but better than never, I suppose). I bought a few more right at the bottom we saw in March. Now I've seen a lot of my stocks come back by 20-40%, which makes me feel better. However, I'm still down about $40K overall. The reason? Because I invested heavily in the "must own" stocks that were 3- or 4-time recs, or the ones mentioned in the special reports (SCSS, FMD, PDLI, AIB, CX, even EXEL) at a very high price, at the time they were recommended. Some of these may recover, but it will likely take a decade or more, others I think have bitten the dust. I am bitter about the hype with which these types of stocks were so strongly recommended. When am I likely to see any positive returns on SCSS and FMD? In ten years? Twenty? My guess is never. Guess I can kiss that $40K goodbye.

  • Report this Comment On June 12, 2009, at 8:35 PM, salvadorveiga wrote:

    tokyovoice... I guess you didn't spend much time at the TA Board in MDP eheheh...

    Seriously now, best of luck

  • Report this Comment On June 12, 2009, at 10:03 PM, peters46 wrote:

    I read perhaps the first 35% of the comments above, and am now in need of a nap. Most of the last comments I read were complaints about articles such as this one, for having TMF service pitches, and one person mentioned Kramer. That brought a question to mind - I believe a study in the last year or so indicated that Kramer influenced the market bvecause of his large following, i.e. he would recommend for or against a stock, and the market for that stock would usually follow his advice. I never read that study. Did the study give any numerical measure of how much his recommendation was assumed to have affected the price. The question brought to mind, tho, is: Have any similar studies been done of TMF service stock recommendations

  • Report this Comment On June 12, 2009, at 11:25 PM, grmagic wrote:

    I'd like to go back to say 2005 to see what you guys and 95% of all other investment analysts were saying back then. I'll bet you were pushing Buy and Hold as hard as any stock broker. I'll bet you held up the Dot.Com bust as a great example of why we should hold stocks for the long term because the little speed bumps we encounter are soon forgotten. If you can show me just ONE article you published prominently on your web site against buy and hold in 2005 I'll become a believer.

  • Report this Comment On June 13, 2009, at 12:40 PM, Beginner110 wrote:

    I have been investing for over 40 years and have never taken any money out except for my childrens college education and don't plan on taking any out in the next 15 years. Buy and hold is the only way to go, but only so long as the premises which precipated the purchases hold. When the basis is no longer valid, sell. My net worth is higher now than it was at the market top in 2007 because of quality companies and great prices. I no longer have the willingness to add to my account but buy and hold has worked for 40 years and is as valid today as it ever was. By the way, due to the quality of companies in my portfolio, my bottom was only 35% below the top.

  • Report this Comment On June 13, 2009, at 1:27 PM, ananth31 wrote:

    I don't know how far fool's go back to track stock prices. Analyzing the companies which are operating for more than 50 years may indicate a scientific trend. We have to keep in mind the trade volumes of shares exploded last 2 decades are or so.

  • Report this Comment On June 13, 2009, at 2:47 PM, FoolSolo wrote:

    The article nailed it right. Buy/hold works in some cases, not in others. I believe the individual investor has the ultimate responsibility to decide on an investing style and investing strategy. But I tend to get a bit nervous when someone tells me to buy and hold through thick and thin of market gyrations. The market has broad trends, and when you bet against the trends you can get hurt. Investing with the trend greatly improves your chance of solid returns. Case in point, had you bought just about any stock in early March this year, you would have made money. Had you been watching the market trend in early January 2008, you would likely have been cashing out, or even shorting. The markets never move in one direction, so watching a few simple signs tells you the general sentiment. For example, bearish signals like when the 20-day moving average crosses down through the 50-day average, or when the 50 crosses down through the 200 are major indicators of downard pressure. The opposite shows bullish trends.

    The best advise anyone can get is to learn how to evaluate the financials and fundamentals of companies, do the basic research on market share, management and competition and then find an entry point that is consistent with the market trend. If you find companies you want to buy, but the trend is bearish, they you can either stay in cash and wait, go short, or look for other investing vehicles until the market trend turns. If the trend is up, then go for it, and stay as long as you still like the company, and as long as the trend remains bullish.

    It's your money, you can believe what you want to believe. Invest in what you want. But try not to give your money away to shiesters and con men, it just makes more of them.

  • Report this Comment On June 13, 2009, at 4:51 PM, jgneuw wrote:

    Anyone know of a program/service that measures degree of correlation between stocks. I imagine it would have to consider moving ave for daily market close. ---- JG

  • Report this Comment On June 14, 2009, at 11:59 AM, Katommy wrote:

    Bottom line is, know your potential and current investiments. Check all available tecnical data and know how to use it. Accept the fact that you will win most and lose some. Company loyalty is a no no!! Buy when you're confident in your technical knowledge and sell at your pedermined limit. After 1987, I learned that buy and hold is for losers!!!

  • Report this Comment On June 14, 2009, at 3:55 PM, TMFTomGardner wrote:

    wufft3 and deepfryer and MaxPower13 and ReadEmAnWeep and KnightTrader4u, thanks so much for the kind words. We have been in business for 15 years, and the best of it is that I actually love our work, our people, our community, as well as our mission, vision, and values more than at any point along the way. When you dread what you do, every tough day compounds the misery. When you love it, you move from delight to delight, even if tough times last for weeks or months. We're incredibly thankful to be able to do what we love....serving people we admire.

  • Report this Comment On June 14, 2009, at 3:55 PM, TMFTomGardner wrote:

    BigFatBear, let me say, I'm as big a fan of CAPS as you are. The combination of member blogs, company/stock pitches, investor ratings, and merit-based company ratings.....it's a thing of beauty and a wonder to behold. You can expect to see us invest heavily in CAPS in the years and decades to come. When it comes to our business, we see it from the same vantage as Jim Sinegal at Costco -- trying to optimize outcomes for stakeholders of the business over rolling 25-year periods. Some companies -- Costco among them -- can be bought and old to great delight. Now, you challenged the value of the articles on Fool.com. I think you need to give us another look. Take a glance at an article like this: http://www.fool.com/investing/general/2009/06/11/how-to-inve.... One strategy you should consider taking is to drop by Fool.com and read the most popular articles listed. I have a bias here...but... I find a lot to learn from there each day. See you on CAPS!

  • Report this Comment On June 14, 2009, at 3:56 PM, TMFTomGardner wrote:

    Damsr2008, I would urge you to extend your study back 50 years to see if selling every 7-8 years makes sense. I definitely think doubling down when the market is off 20%+ and multiples are low....then paring back positions (or not adding) as the market bounds through new highs...has some merit. Best of luck as you develop your strategy!

  • Report this Comment On June 14, 2009, at 4:17 PM, TMFTomGardner wrote:

    spongelarry, just knowing that you couldn't handle a decade of zero growth for your portfolio is extremely helpful. You can imagine a 27-year-old with an IRA and 401k taking a different approach. Rather than trying to guess what decade will disappoint...instead...she simply adds new money to both accounts each year. And if the decade yields nothing for the S&P, she has accumulated shares presumably at price points that actually give her a positive return. Further, as time passes, the discipline of regular saving and perpetual investment will very likely serve her well thru life. This is the way, in my opinion, for anyone under 40 to become a millionaire. The problems with long-term investing emerge as a person ages, and their timeframes shrink. Mind you, I've known some investors over 80 that take a long-term perspective to wealth building. But for the average person, as they hit 50...the rational fear of 10 years of zero return suggests they should begin hedging. I think TMF PRO and Jeff Fischer can really help equity investors period...BUT...particularly those over 50. Finally, my bet is that you will succeed as an investor because of what you know about yourself. Foolish best.

  • Report this Comment On June 14, 2009, at 4:17 PM, TMFTomGardner wrote:

    pberardi, great reasoning. I agree that you can and should have different assumptions for each investment. It takes work to learn this. Buying and holding Johnson & Johnson or Procter & Gamble or Berkshire or Danaher et cetera....that's about the smarest think an investor in American equities could have done over the past few decades. And, yes, there are people out there who did just that -- and are now worth many millions of dollars for it. But you can't take that same perspective with all of your investments...particularly those from which you'll need more than dividend liquidity along the way. Fool on.

  • Report this Comment On June 14, 2009, at 4:17 PM, TMFTomGardner wrote:

    galtline, good points across the board. If you read this response to your comment, I'd love to hear what sources you're using for your macroeconomic research. And how much influence are you giving to economics as you build out your stock portfolio? You consider general trends -- or you're building multi-factor models?

  • Report this Comment On June 14, 2009, at 4:18 PM, TMFTomGardner wrote:

    outoffocus, all excellent points -- truly. You should be writing articles for Fool.com. I wonder...how regularly do you look in on your investments? Monthly, quarterly, yearly?

  • Report this Comment On June 14, 2009, at 4:36 PM, TMFTomGardner wrote:

    HLChin, I like this thinking. I remember reading about Buffett challenges his associates to think about which sorts of industries and companies deserve long-term capital. Same thing with Bernard Baruch, a great investor. One thing they've both pointed to are consumer product companies selling low-priced items which millions of consumers use every day. Candy, food, household products, et cetera. It used to be true of newspapers, but platform change is destroying them. I do think daily/weekly mainstream habits are a good place to look for multi-year, even multi-decade, holding periods. Go opposite to that -- think autos -- and you have groups of avoid. I hope you continue studying this and report back what you find.

  • Report this Comment On June 14, 2009, at 4:36 PM, TMFTomGardner wrote:

    Royzer, in my investments, I think an average holding period of 3-5 years makes the most sense. This gives your research enough time to play out. It keeps you focused on investing in businesses (not merely stock prices). And yet it has you checking in a few times a year to make sure your assumptions still hold true. Certainly, though, for us...it's about **accumulating** large amounts of capital! Best of luck.

  • Report this Comment On June 14, 2009, at 4:36 PM, TMFTomGardner wrote:

    ScottieWP09, there is much that you say that I find agreeable. What we have just been through is one of the worst decades in the history of equities. And by that I mean -- take every rolling 10-year period since 1900 -- and then look at the returns we got through March of this year and you'll see that we've had an extraordinary uncommon experience. For this reason, I too am inclined to believe that the teeth gnashing about long-term investing is being overdone. It's not as if the thousands of public companies in the US are standing in line to become the next AIG. So, as with so much in an open auction market, it pays to at least consider the opposite of what the crowd is doing. Now, where we part ways a bit is in your thinking about the efficient markets theory. I'm not a big fan of the theory. I recommend reading the Buffett speech at Columbia Biz School in the 1980s entitled, "The Superinvestors of Graham and Doddsville." You can Google and find it. Thanks for the note!

  • Report this Comment On June 14, 2009, at 5:03 PM, TMFTomGardner wrote:

    TerryEJarvis, my bet is that you have done and will do very well as an investor. I like where you are placing emphasis in your strategy. Best of luck with it.

  • Report this Comment On June 14, 2009, at 5:03 PM, TMFTomGardner wrote:

    BoctorBill, one of the keys is to find your strategy, define your rules, and gradually evolve them with time. You seem to be doing this, quite well. I hope you'll continue to participate in the community, teaching others about your investment approach. They say that a teacher learns 7 times more than the student who listens...so as you share more of your philosophy for investing, perhaps on a CAPS blog, I believe you will accelerate your into total mastery.

  • Report this Comment On June 14, 2009, at 5:04 PM, TMFTomGardner wrote:

    coolnewbie, thank you for the very kind words. I have the good fortune of doing what I love. I have had little time over the past 18 months to be out in the community...the result of my operating role at the company. However, every time I do, I love it. I've always loved our CAPS motto -- "Investors helping investors beat the market." I wish you the best in your quest for the financial freedom to do what you want in life.

  • Report this Comment On June 14, 2009, at 5:04 PM, TMFTomGardner wrote:

    smtyou, I do believe this line very much, "It's always fashionable to knock long-term investing in a bear market." Ultimately, I think every investor needs to answer to the four Ts outlined in this article. For some, long-term investing just won't work -- they may simply not have the temperament for it. But for those who can demonstrate excellence in all four, I do believe it is the lowest-cost and most efficient way to accumulate substantial wealth.

  • Report this Comment On June 14, 2009, at 5:04 PM, TMFTomGardner wrote:

    salvadorvelga, thanks for your comments, very thoughtful. As for MDP, I'm sorry you decided to cancel. The service is handsomely beating the market -- albeit showing losses on the absolute returns. . . temporarily! I wish I could play a front-row, center-stage role across Fooldom. I have found that the best way to scale --- since I haven't found a way to extend the day --- is to work with great people, learn together, focus on beating the market, and serve members as best we can. I'm proud of how Million Dollar Portfolio is going. I think the addition of Ron Gross to our team is truly great.

  • Report this Comment On June 14, 2009, at 5:05 PM, TMFTomGardner wrote:

    McCrikey, your comment suggests to me that maybe you fell for our April Fool's Day joke. I assure you that -- first of all -- we do not have companywide positions on what role government should play when we hit trouble. So our analysts at Fool HQ, analysts that work for us spread around the world, and our open community....they are free to express their opinions. We are looking for good thinking, clear writing, and track records (cf. CAPS is, in part, designed to help us all find the world's best investor minds to follow). But I don't think you'll find blind cheerleading for the bailouts of this past year...certainly not at Fool.com.

  • Report this Comment On June 14, 2009, at 5:10 PM, gyndr wrote:

    Buy and Hold is less attractive for the individual with advancing years. At age 88 a 10 year window is perhaps generous. I am retired therefor computer time is not a concern.

    With this as background I find that I have 95% equities: Small caps <$50 (prefer <$35) stock price, new purchases are initial >1% of portfolio, generous helping of foreign stocks, no mutual funds, more ruthless in selling weak or non performers for more attractive stocks, selectively taking large profits (at least partial sales) for reinvesting, and, in 2008 creating excess capital losses via BUY 30 day window SELL stratagy. bunker@olypen.com

  • Report this Comment On June 14, 2009, at 7:29 PM, jpeterse wrote:

    I don't think a prudent investment strategy is to follow just one strategy. I think there are times to be offensive, and times to be defensive. I think is just as much identifying the best investment opportunities as it is to identify the best way to protect the investments during bad times.

    Now I haven't been investing long, and I don't have reams of experience in the field. I certainly don't have enough experience to partake in the Pro service. I therefore depend heavily on the basic stock advisor service.

    But what I do take away from this past year is this. By putting too much faith in the TMF repeated calls for patience, to stay to course, to remember that (to paraphrase) we are in it for the long haul, I lost out on a great possibility to increase my positions and ultimately my net worth.

    I don't mean to buy at discount – I did. I bought all I could in March/May. What I mean is, that I could have significantly increased my positions FOR FREE.

    Heading the recommendations from TMF to hold my positions I stay on the ship while it is taking on water, was most likely not the right thing to do.

    I believe it is a big mistake by TMF not to recognize and take benefit of market cycles when they occur. Simply staying on the sideline while the net worth of our investments are tumbling, and further recommending TMF clients to do the same is just plain wrong. TMF spends hundreds of hours investigating the best positions for our capital. They comb through corporate financial and market analysis reports to identify the investment opportunities. Not investing the same type of research to forecasting and take benefit of market cycles are in my opinion a big mistake.

    I felt I needed to test my assumption, that not taking benefit of the market cycles is a bad idea.

    Without trying to be too much of a Monday morning quarterback, I tested a little what-if scenario.

    I based the calculation on the TMF core stocks, with a fictitious portfolio of all 7 core stocks.

    I then picked two dates, based on when I would think that reasonable argumentation would be available to make the recommendation, and placed the sales/buy order at the last and first trading dates of that month respectively. I know that no one can pick the absolute bottom, nor the absolute top. I know that these dates can (and likely will be) debated, so I added some references from my research below.

    I picked the sell date of May 30th 2008, some 6 months after the discussions of a recession had surfaced in the main stream media, and buy date of June 1st 2009, some 4 months after discussions of an improving market had begun. I think these dates are reasonably conservative enough to be realistic.

    I found that I could have ended up with the same positions as before the crisis, but gained a 8.8% net growth. In Berkshire I would even have increased my number of shares by 50% - for free.

    TMF recommended in June 2008 to not “look for exit ramp”. That as it turned out, may have been the worst recommendation yet. I should have dumped my positions and put the money aside.

    So Tom, I don't think the question is whether the buy and hold strategy is dead – but whether is sound to have it stand as the one and only strategy. I think the question should be, if TMF should adjust their product to include buy/sell recommendations based on market conditions.

    10/24/07 Economy is in recession

    (http://www.reuters.com/article/businessNews/idUSL24741333200...

    04/17/08 An Extreme Buying Opportunity

    (http://www.fool.com/investing/small-cap/2008/04/17/an-extrem...

    07/23/08 Quote: “Let us be clear: Now, as the market hovers near a three-year low, is not the time to look for the exit ramp”

    (Motley Fool E-mail titled: A Note for Our Members)

    09/15/08 Don't panic, stay to course

    (Motley Fool E-mail titled: A Message for our Members)

    02/23/09 Economy is recovering

    (http://www.reuters.com/article/newsOne/idUSTRE51M1T920090223...

    03/01/09 Now is a good time to buy

    (http://www.fool.com/investing/value/2009/03/06/is-this-the-m...

  • Report this Comment On June 14, 2009, at 10:02 PM, IWannaRetireSoon wrote:

    I withdrew from all my equity positions as of 1/'08. I'm still waiting for a re-entry point. My point is that sometimes, the best position in these markets is NO position. I haven't lost anything except what inflation has taken. Fortunate? yes. I can ill afford to gamble my retirement funding in what is basically a flat-line market. I don't have time to research all the possibilities, or neglect the probability that ALL stocks have been/ will be negatively impacted by the deadwood out there now. I would rather wait until the markets begin advancing due to increased economic activity rather than on "not quite as bad" reports as unemployment numbers being less than expected.

    After all, I believe the driving force in our economy is the willingness and ability of Consumers to depart with their hard-earned money. Until that changes, I'll be quietly waiting for my re-entry signals.

    BTW, Tom, I have been reading some of your published arcticles and am intrigued by the observations and suggestions in investing. Keep up the great works. I'll probably subscribing to one or more before the end of this summer.

    Thanks

  • Report this Comment On June 15, 2009, at 12:26 AM, CNCGeek wrote:

    First, there should be some way for your current subscribers to know at a glance that the article we are about to spend our valuable time reading simply ends in a sales pitch with no valuable answers to the headline topic. I subscribe to 2 of your features.

    For 15 years I watched my hard earned dollars evaporate in the hands of "professional investors". Finally I realized that I could do better than these paid Bozos. The primary difference being that I cared more about my money than the pros. I am grateful for TMF but highly annoyed by the aggressive marketing efforts.

  • Report this Comment On June 15, 2009, at 9:03 AM, etdiii wrote:

    It seems to me that commentators and analysts misread the message of their long term analysis.

    As far as I know, each defender of buy and hold uses a broad market index over a period of time that exceeds 40 years. They then proceed to assume that selecting a subset of that broad universe will perform the same as the universe. Ain't so.

    The buy and hold strategy might work work for broad index funds of say several hundred to perhaps 2000 stocks but not work well for portfolios of fewer than several hundred stocks.

    Even the Fool does not blindly follow the buy and hold mantra; after all in both Gems and MDP the Fool as taken money off the table for stocks it has owned for less than 3 to 5 years because either the stock met the pre-set price target or the presumed basis for selection proves to be incorrect.

    Also the buy and hold strategy seems to presume that all of the calculated long term increase in value will be there when you need it. Not so! Suppose you needed your money for retirement income starting in mid-2008?

    It seems to me one's portfolio needs to have a sub portfolio of index funds (ETFs) that one maintains but makes sell and repurchase decisions based on macro economic factors. For example if one expected the dollar to decline to a significant extent over an extended period, then perhaps allocating more funds from US index funds (say IVV) to foreign index funds (say EFA or EFF) might be prudent. One does not make changes often but one pulls back when the macro climate seems to how more downside risk than upside potential and one builds up the investment when the converse seems possible.

    A second sub portfolio might be individual stocks that are tracked and managed regularly. For me Hidden Gems and MDP provide input to such stocks that one can hold until price targets are achieved or the original investment thesis proves incorrect. I track the performance vs the Russell 3000 for MDP and the Russell 2000 for Gems since those seem to represent the universe of stocks for each portfolio. I also do not just track the index percentage change vs the actual portfolio value, rather I track actual portfolio dollars against a dollar value calculated using changes to the index on an investment weighted bases each month.

  • Report this Comment On June 15, 2009, at 10:10 AM, mostlylucid wrote:

    As a premium subscriber, I too am tried of the long "ads" that end with the answer being joing yet another of their services.

    Stop this while you still have me!

  • Report this Comment On June 15, 2009, at 10:42 AM, BaigManOnCampus wrote:

    This is one of the most disappointing articles that I have ever read. Now, here is my advice to The Gardners, "CHANGE YOUR STRATEGY OF LONG TERM INVESTING". Here is why:

    1) I am suppose to turn old and gray before I get to enjoy my "wealth"? When it is very possible that the year I retire, and decide to cash out there can be another generation of CEOs that found new tricks to fill their pockets, cheat the system, and have the SEC wait until the entire economy collapse again and arrest them. Nooooo thanks!

    2) What makes you think I will live long enough to see my wealth mature. In a world of ever increasing freak accidents, increasing number of natural disasters, and increasing number of "I don't know anything about the future"....I'm suppose to wait for my wealth to mature? Sorry, I don't think so.

    Sorry to say, but there needs to be a more creative approach they the buy and hold one.

  • Report this Comment On June 15, 2009, at 1:37 PM, streetstupid wrote:

    An argument can be made for pretty much any investing style but for any one individual luck is going to play a role. I inherited a small portfolio in 1991. For the first 10 years I slowly learned about investing and shuffled securities around to better suit my take on what would be a good investment. Beginning in 2000 I became a seller as I had kids in college. I sold one or two stocks at a loss after 2001 but they were mostly just to offset my gains as I was doing well and needed to cash in for the costs I was bearing. Since January 2008 I have not needed to sell (everyone is graduated). I dumped Wachovia in 2008 but that was just a defensive move. Imagine if those years were shuffled. Suppose I had needed the money to pay college bills beginning rather than ending in 2008? Buying and holding unless I was pushed to sell for some reason has worked fine for me but a lot of that was simply the unmitigated luck involved in when I could buy and when I needed to sell.

  • Report this Comment On June 15, 2009, at 9:32 PM, jm7700229 wrote:

    1. Buy and hold is dead

    2. Dot Coms don't need to make a profit

    3. The rules have changed

    4. Real estate only goes up

  • Report this Comment On June 16, 2009, at 5:09 AM, thisislabor wrote:

    all of the above are false? i see the connection!

  • Report this Comment On June 16, 2009, at 5:18 AM, thisislabor wrote:

    etdiii thankyou for posting, i learn when you speak.

  • Report this Comment On June 16, 2009, at 5:26 AM, thisislabor wrote:

    jpeterse, you are correct if and only if you can correctly identify your market cycles for your time frame given.

    with that said, I'm still trying to figure out wth happened to cheesecake factory from aug 08 to now of 09. end position is same one i expected but I did not correctly predict the huge swing in price during that period of time.

  • Report this Comment On June 16, 2009, at 11:03 AM, LngTrmVw wrote:

    Buy and hold is short for:

    Do research, understand to the degree you feel necessary: the economy (national and international), the industry, and the company, BUY when you feel the price is appropriate for that company and its future prospects in the current economy, continue to follow that company and continue to research the economy, the industry, and the company to verify it is still a worthy investment, and HOLD, as long as your research indicates it is a worthy investment, and sell when you believe the company is no longer a worthy investment.

  • Report this Comment On June 16, 2009, at 11:07 AM, LngTrmVw wrote:

    the buy and hold complainers thought the strategy was as simple as the name, and refuse to acknowledge that they are responsible for their investment choices, whether they buy or not. Would be nice if we could trust someone without question and beat the market every day, but that's how Bernie Madoff became the king of Ponzi. Don't let it happen to you. Fool.com offers an immense amount of free content and analysis, but you still have to do your own research when investing.

  • Report this Comment On June 16, 2009, at 12:04 PM, DemonDoug wrote:

    Tom, the unfortunate side-effect of using the theory of this article is that it completely ignores macroeconomics and is biased towards the US stock market over the past 100 years. People investing in russia, japan, any number of south american countries, would have been completely wiped out by macro conditions in those places, or at least severely impoverished by investing in stocks as opposed to safe currencies or hard assets.

    There is nothing wrong with "buy and hold" given the right companies to buy and hold for. The problem is that there is way too much optimism on fool.com regarding stocks both in general and specifically. Had the majority of fool readers taken the advice of myself and many top CAPS players from 2007, many would have been spared the massive wealth destruction they have gone through.

    Instead, the motley fool decides to "ignore" macroeconomics because it's too complicated and doesn't matter anyway. Doesn't matter eh? Is that why 14 of your 17 remaining picks from your Stock Adviser newsletter in 2007 are in the negative? Many are down more than 30%, and are crappy companies anyway. Meritage homes as a buy in march of 2007? To me that just shows that listening to people who claim ignorance in the face of a wave of macroeconomic indicators is about so foolish (lowercase f) as you can get.

    And I still can't get over the gushing and love the Fool had for Moody's. Quite possibly the most unethical company involved in stock and bond investing out there. It is still an active pick on your stock adviser from back in 2002. For shame Tom, for shame.

  • Report this Comment On June 16, 2009, at 12:12 PM, galtline wrote:

    TMFTomG,

    "galtline, good points across the board. If you read this response to your comment, I'd love to hear what sources you're using for your macroeconomic research. And how much influence are you giving to economics as you build out your stock portfolio? You consider general trends -- or you're building multi-factor models?"

    I've done a lot of reading and, if I'm honest with myself, still feel overwhelmed...but I like RGEMonitor.

    As to how much influence I'm giving to economics -

    The current economic climate is part of the reason that I've continued to add to certain positions (averaging down), take gains, and keep some money on the side to continue throwing in.

    It has also effected the stocks that I pick - For most of my money, I've been gravitating toward stocks that have strong positions and little or no debt (which I feel will be important on how they weather the downturn and come out of this).

    There have been a few speculative trades as well, but I don't use a lot of money in those (and in the case of leveraged ETFs, I set stops and take gains more readily...I was caught in a couple of them on CAPs, but such is life).

    I've also opened some positions just for "what if" scenarios (things like gold, silver, oil, agriculture, and commodities in general).

  • Report this Comment On June 16, 2009, at 1:39 PM, MaskedFinancier wrote:

    I've always viewed long term investing as a myth.

    Every investment is a gamble of some sort.

    Buying the index on a dollar-cost-average basis is effectively a gamble on the continued growth of the global economy. If you buy the US index then it is a gamble on the continued growth of the US economy. While both of these outcomes are fair bets, they are by no means a racing certainty. Ask an investor from the 1920s who bet on the long term growth of the Argentinian economy.

    In the investing world dollar-cost-averaging has been a reliable companion to the myth of long term investing. DCA too has major problems which have been addressed effectively at The Big Money (http://www.thebigmoney.com/articles/explainer/2009/02/19/pun....

    I've always wondered why the likes of Warren Buffett would advise a long term index investment approach for the "average person". This is simply stating that the majority of people are incapable of managing their finances and investments.

    We should offer more encouragement to people and not just give them the easy option of investing "long term" using "dollar cost averaging". If that is all someone is willing to submit to then perhaps they deserve to achieve sub-par returns over time.

    People need to take responsibility for their investments, and then determine what portion of passive / active / long term / short term investment strategies they should use across their portfolio.

  • Report this Comment On June 16, 2009, at 5:09 PM, salvadorveiga wrote:

    "salvadorvelga, thanks for your comments, very thoughtful. As for MDP, I'm sorry you decided to cancel. The service is handsomely beating the market -- albeit showing losses on the absolute returns. . . temporarily! I wish I could play a front-row, center-stage role across Fooldom. I have found that the best way to scale --- since I haven't found a way to extend the day --- is to work with great people, learn together, focus on beating the market, and serve members as best we can. I'm proud of how Million Dollar Portfolio is going. I think the addition of Ron Gross to our team is truly great."

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

    I agree the addition of Ron was great but beating the market handsomely?

    MDP is beating the market by 3% points on MDP's scoreboard, while MDP returns include dividends and S&P benchmark does not... so if we were comoparing apples to apples those 3% points would disappear im sure...

    I cancelled the service because the bear market is not done yet. I gave all I could, and all my efforts when at MDP providing my analysis...somepeople took advantage some didn't...

    I intend to get back to MDP once the bear market is over... that will be once I have the technicals in place and they tell me so. I'm a technical analyst not a fundamental guy, so once I have a bull market on a technical perspective, I'll go to someone who can review some good companies better than I do, and that is TMF I believe

    At least I hope so to return to MDP if it still exists because I have a long term target of 300-375 points for S&P and don't know if you'd maintain the service. I'd like to think you would, unlike what happened to Paydirt...

    My best wishes

  • Report this Comment On June 18, 2009, at 7:35 PM, brocksamson wrote:

    Buy and hold may not be dead, however it's certainly going to sleep for a while.

    The massive amounts of liquidity flowing around will distort price signals and make the markets quite chaotic for some time to come.

    I think the best strategy in this market is to have maximum exposure to volatility on both sides.

  • Report this Comment On July 08, 2009, at 7:20 PM, bizzanno wrote:

    Let me just translate that: We haven't got an exit strategy.

    Don't expect too much action in world markets right now.....they're too busy pis"" themselves laughing.

    “Exit strategies will vary from country to country depending on domestic economic conditions and public finances,”

    The markets will pull out these little boys (us) one at a time, take them (us) round the back, pull their (our) pants down and give us a good shafting. Stick a sweetie in their (our) gobs and send us back into the Economy 101 classroom.

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