So Is Buy and Hold Dead or What?

When the S&P 500 -- the proxy for U.S. blue-chip companies -- loses money over a decade-long time frame, old assumptions are questioned.

And when General Motors, AIG (NYSE: AIG  ) , and Citigroup (NYSE: C  ) -- one-time giants of Corporate America and so-called “widow and orphan” stocks -- go belly-up or require Uncle Sam's assistance to stay solvent, "buy and hold" starts to feel like a quaint relic of the 20th century.

Investor summit
Over the coming days and weeks, Fool.com will be hosting a debate on whether buy-and-hold investing is truly dead. In the spirit of celebrating the motley, Fool advisors, analysts, and editors will be weighing in alongside investment legends including Vanguard founder Jack Bogle and PIMCO CEO Mohamed El-Erian.

As part of our debate, on Monday, June 15, 2009, at 12 p.m. ET, Motley Fool co-founder Tom Gardner will host an emergency online investor summit: Is Buy and Hold Dead? Admission is free, but you must register to attend.

Fool co-founder David Gardner, dividend-investing expert James Early, global investor Tim Hanson, and Motley Fool Pro lead analyst Jeff Fischer will all answer this pressing question.

The answer may surprise you. Be on hand Monday, June 15, 2009, to hear every word. Again, admission is free to Motley Fool readers. To reserve your spot, click here.

Perhaps most importantly …
Fools will be weighing in. Investment experts will be weighing in. But most importantly, we want to hear from you. Use the comments section below to let us know your thoughts!

Mark Cuban recently told us that buy and hold was long dead. "It has always been a sucker’s bet. … Buy and hold is a great marketing slogan for funds that want to take your money. Nothing more or less."

With that, let the debate begin!

For all our buy-and-hold coverage:

The Motley Fool has a disclosure policy.


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Comments from our Foolish Readers

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  • Report this Comment On June 11, 2009, at 2:32 PM, CPACAPitalist wrote:

    Like the answer to most complicated questions, I would say "buy and hold" is dead...sometimes. I think the days of buy and hold, set the cruise control with reinvested dividends, and check back in 5-10 years is dead. To survive and thrive in todays market requires a level of personal involvment, a level of self awareness above and beyond whats been the norm for the past several years. An honest evaluation of your knowledge, risk tolerance, and timeline are crucial to determining if you can continue to profit from employing a modified buy and hold strategy or if its time to start putting your savings into fixed income investments.

    Buy and hold is not dead, but buy and hold with no thought invested is dead. You have to be observant, make moves when the signs are there, weather downturns to capture the upturns, and seek out the advice of qualified experts like the writers here at The Fool. I'm looking forward to the discussion on the 15th.

  • Report this Comment On June 11, 2009, at 2:34 PM, catoismymotor wrote:

    In my opinion to “buy and hold” is not dead. Some people accuse those of us that take this approach to investing as being lazy. This simply is not true. Looking at this from my perspective I do a great deal of homework before I make a purchase. I force myself to DCA every month in order to temper my approach and allow time to have a good idea as to what I am getting myself into. Every position I have in my Roth IRA is expected to remain in place for ten years. As we all know if you want to make God laugh all you have to do is tell him your plans. If I see signs that I need to sell before then I will do so. I am not so stubborn as to let a company plow into the ground and take my money with it.

    Not all of my investments live under the roof of my Roth. I do have a regular portfolio of stocks that I regard as shorter term, riskier, holdings. Ideally they will stick around for two to five years. Some may stay for less or more time.

    Having the two accounts helps to keep my “bull” exercised while my “bear” comfortably guards his den.

  • Report this Comment On June 11, 2009, at 3:05 PM, robstuck wrote:

    NO. this post is foolish.

  • Report this Comment On June 11, 2009, at 3:30 PM, FleaBagger wrote:

    cato, you should have your higher turnover stocks in your Roth, and your buy-and-hold stocks in your taxable account (assuming you should have anything in your Roth, an assumption I am starting to question).

  • Report this Comment On June 11, 2009, at 3:32 PM, omt68 wrote:

    Buy and hold is not dead as far as investing in individual companies are concerned. It hardly matters what the S&P 500 index, or any other index does. Buy and hold means, or should mean, that one examine a company and make the buy sell decisions based on the result of said examination, compared with ones investing objectives.

    It is a misunderstanding to believe that "hold" means hold forever. It means hold until the objective is met, or until one determines that the company is unable to meet the objective

  • Report this Comment On June 11, 2009, at 4:10 PM, XMFRael wrote:

    I put in my vote for a qualified "not dead" -- i think it was Bogle who said that he has never met a good market timer is 50 years in the business. I haven't been around quite 50 years, but I agree.

  • Report this Comment On June 11, 2009, at 4:22 PM, RHaganC wrote:

    If you bought all and held onto every DJIA stock in history, what would you be at now? How many have died that woulda sunk your earnings?

    I believe in the survivorship bias. We are only traking what is still around, and ignoring all those that went under and took the wealth with them.

    Buy and hold FOR HOW LONG? There has to be parameters set here. this is too broad.

    It's a game of luck; if you are broadly invested, you expose yourself to more luck. If you can afford it, options would be the way to go IMO.

  • Report this Comment On June 11, 2009, at 4:40 PM, supralam wrote:

    obviously citi is still alive...as well as AIG..they will..

    i am a 10,000 share holder from $1.50 and $1 for AIG...and never give up.

    Citi and AIG is a vise investment...

    Give them a chance to multiply your $...

    its not too late to invest now. imagine your 3.50 now become $50 later...

    They worth simply more than $50 bucks in the past.

    from their rebounding history, they will grow at least $30 (or more) in the next 8 years...do more study young lads..it will make u survive and "recession proof" all the time...

  • Report this Comment On June 11, 2009, at 4:40 PM, CPACAPitalist wrote:

    RhaganC i'm going to respectfully disagree that investing is a game of luck. If your playing it as a game of luck that is when buy and hold should be dead for you, but if you do your research and invest in companies with solid financials and a enduring competitive advantage you take luck out of the equation. And when you see a stock heading for delistment, you move your money into something else. Buy and hold doesn't preclude you from making moves, it just means you don't actively try to time the market.

  • Report this Comment On June 11, 2009, at 5:24 PM, TMFRandy wrote:

    This is a quandary for me. And I will start off by saying I am by no means an expert investor but I am an active one. I have a core portfolio of long term holdings with some side money that I use to try and juice returns.

    I agree with the notion that buying a stock(s) and coming back in 5-10 years is dead – and maybe that’s the “qualified” TMFRAEL is talking about . I personally adhere to the notion of buying good companies and holding for as long as it makes sense. I will say this doesn’t appeal to the risk tolerant portion of my investing soul. I do like buying ETF’s (long and short) or options to increase results or as a hedge. I guess at the end of the day I would say buy and hold is wounded……it cant just be buy and hold. Its got to be buy and hold as long as it’s a good company and there are opportunities to improve results by taking advantage of special situations.

  • Report this Comment On June 11, 2009, at 5:38 PM, RaulChapin wrote:

    Many people feel that just by doing something they can improve the results of a process. A classic experiment to temper with this common misconception (used often in total quality textbooks) is what they call "Funnel Management" the example has you drop balls in a funnel the desired result is that they fall as close to a target as possible. You have two choices, you can keep the funnel always in the first spot you choose or you can move the funnel. Most people choose to move the funnel to "fine tune" the results. This turns into most balls on average being farther from the target than if the funnel is kept in a steady place.

    Anyway, in investing, each time you buy or sell something there is a cost involved. There is also the risk of you buying right before the drop, or selling right before the rebound. What buy and hold (and a big part of it, index investing) does is it says:

    If we do not have a proof that our move will have a better result than just pasively leaving our money in an Index fund, or on our previous choice then we are better off not changing strategy, because even if our new stock performs as well as the one we got rid off... the friction of selling one and buying the other will mean we lost in the end.

    I have some Bonds, some CIGs some Index Funds, some Real State and I will not make any moves until I can honestly say I am willing to buy and hold company A or company B even if it losses in teh short term up to X%... I mean you have to set limits... in the funnel example, if you bonheadedly placed your funnel a mile away from the target and then refused to move it because you were hoping to eventually hit it.... well then you were just not very wise :):)

  • Report this Comment On June 11, 2009, at 5:53 PM, hws234 wrote:

    Buy and hold isn't dead as long as inflation is on the move. The whole concept of the"death" of buy and hold is based on the shock to traders of this markets collapse. Not unlike the great depression of the 30's. History repeats with variation..

  • Report this Comment On June 11, 2009, at 7:13 PM, goalie37 wrote:

    Is Buy and Hold dead? I would argue that this market is exactly what Buy and Hold was intended for. Many of the world's most profitable, dominant corporations are available at dream prices! The caveat is that you can not forget about these stocks - you must follow them closely for the duration of the time they are in your portfolio.

    The idea of abandoning a proven thesis at the exact wrong moment is the herd mentality that Fools seek to exploit. When people panic, I want to be the guy they sell to.

  • Report this Comment On June 11, 2009, at 7:24 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?

    Please... have some sense.

  • Report this Comment On June 11, 2009, at 7:27 PM, MyPiggyBank888 wrote:

    supralam is right! Everyone should risk something. Don't always bet on a lotto when there is AIG. I remember my granma bought land in Sierra Blanca where they still haven't built the golf course, does that mean they never will build a goff course, no! One day, maybe they will attempt to build a goff course, but settle on mineral exploration like gas or something else. AIG will become something after all. Just ask the miners working there now!

  • Report this Comment On June 11, 2009, at 7:34 PM, brwn8484 wrote:

    Are you people crazy? The only reason a stock (or anything else) is cheap, is that it is fairly valued compared to its perceived value. And perception being what it is, I wouldnt bet my farm on the market just yet. If it was that easy, everyone would be a gazillionaire.

    My guess is that we have a substantial risk of another major correction, given earnings on the S&P and Dow have plummeted to pre-1938 levels.

    But, you are all the experts on buy and hold... so go ahead and buy. I just hope uncle Ben and the govt boys dont drop a couple of wolves into your buy-and-hold sheep barn. (You know... the canine brothers... Stagflation, Depression and the ever present Unemployment).

    On the other hand you have always been right before. Thats why more than half of the investment pool has vanished in last 6 months.

    Let me see if I get this straight. You put all your money in the pot. Then we take half and flush it down the toilet. Now you want me to put more into the pot and accept that it will now magically grow again... while jobs are declining, and inflation is accelerating and govt is spending like a drunken sailor. Yeah right!

  • Report this Comment On June 11, 2009, at 8:50 PM, Guthree wrote:

    I would say "buy and hold" makes sense now for the first time in over a decade.

    There is a new measure statisticians at MIT just came up with, and it has been backtested: it is calle P/E ratio. No, wait, that's been around for ages. When the S&P ratio is around 10 or less, it's a good time to buy. When it's about 35, not so much.

    We have people preaching buy and hold when P/E's were 35. Now when buying and holding for ten years is almost a guarantee of a nice return, people flee.

    You know, in 2000, when the Naz fell from 5200 to 4500 and lower, we heard time and time again, "there is blood in the streets -- now is the time to buy." Blood in the streets to those people meant a 10% or 20% drop. Now we truly do have blood in the streets and few want to buy. Until lately, even cheerleaders like CNBC were bearish. Figures. Bullish when P/E's are 35, bearish at 10.

    I guess maybe some people are not buy now, though, because they are liquidating their 401K funds so they can withdraw money early and meet payments on underwater houses.

    Thanks, Motley Fool, for having John Bogle. His book "Battle for the Soul of Capitalism" is the best investment book for our times. I don't always agree with Bogle's investment philosophy, but that book is great.

  • Report this Comment On June 11, 2009, at 9:02 PM, baekeland108 wrote:

    BUY-AND-HOLD

    Like everything "CHANGE" is the main lever for the Buy-and-Hold debacle.

    Best,

    Bill Rothwell

  • Report this Comment On June 11, 2009, at 9:40 PM, liammccusker wrote:

    This question is too open ended...WHy not just answer this one while you're at it...

    Which came first, the chicken or the egg?

  • Report this Comment On June 11, 2009, at 10:04 PM, sentinelbrit wrote:

    I worked in the investment business for 25 years for a major mutual fund company. Throughout my career a buy and hold strategy was recommended. Mutual fund managers tended to be fully invested, though at times cash could get up to 10%. Their remit was to outperform the market indices, so relative performance was key. It was not about absolute performance but it was assumed that over the long term the market would rise providing positive returns. We produced a lot of evidence to support a buy and hold strategy and the difficulties with market timing. From 1986 to 2008, my career, we experienced the 87 crash, the recession of the early 1990s, the emerging market crash, the Russian crisis, the LTCM debacle, numerous elections etc. Despite all these crisis and panics, an investor did well with a buy and hold strategy.

    We are now confronted with the stark reality that investors lost 10 years worth of market gains in less than a year (stock prices go up by the stairs and down in the elevator).

    The alternative to a buy and hold strategy is to time the market. I have never met anyone who could do this consistently well - and I have worked with some of the best fund managers. Indeed, my guess is that anyone who tried to time the market would have lost more money than a buy and hold strategy from 1986 to 2008. Why? Because, investors find it incredibly difficult to buy when the market is down (as we have just witnessed) and too susceptible to invest after the market has gone up. It is not unusual for markets to rise rapidly at the beginning of a bull market and also at the end. Consequently, tail-end charlies get terribly excited because their investment goes up rapidly which makes them invest more - right at the top.

    A third way is cost price averaging. This is really a version of buy and hold - except you buy over a long period of time. This avoids the temptation to time markets and invest at the top. The advantage is investors would have been buying during the market lows. But even this strategy would have lost investors money over the last ten years but probably not as much as a buy and hold or trying to time the market.

    In my experience, a contrarian, value based approach provides the best long term returns. A small cap bias works well over the long term as well. Rather than time the market, sector selection can help relative returns.

  • Report this Comment On June 11, 2009, at 11:03 PM, rijoker wrote:

    When I talk with others I know, they all try and convince me that the buy and hold approach is dead. They say that information flows to easily on the internet and makes it easy to jump in and out of stocks.

    To that I disagree, buy and hold is still alive and a great approach to take. The information does flow alot easier then it used to, but that does not mean you need to jump in and out.

    About 80% of my portfolio I buy with the intent of holding for at least 5 to 10 years. The other 20% I look more at the short term, but still not day trading. Maybe holding them for a few months. But taking this approach, and looking for better quality stocks, I have been able to get great returns in my portfolio. I have beaten all my friends who try and jump in and out by a minmal of 40% above anything they have done.

    I will continue to look for quality and hold. But one key to remember is to still stay on top of what is going on with the stock/company. I will still review what I have to ensure that I should be holding said stock or if I need to unload it for what ever reason. Do not get personally attached and more importantly, do not make rash quick decisions on unloading a stock either.

  • Report this Comment On June 11, 2009, at 11:50 PM, spongeLarry wrote:

    sentinelbrit, I respect your years of experience but I have to honestly say that I can't fathom how anyone who was actively trying to time the market could possibly have failed to pull the sell trigger at some point during the fall from Oct. 2007 to Feb. 2009.

    I understand it if you were a LTBH guy, but not if you are a self-admitted market timer. I guess I just don't get it - maybe you mutual fund managers are just not as flexible as us regular guys due to the larger sums and "special" rules you have to deal with?

    For me, buy and hold is over. I'm in 100% with this current rally, but when it turns, I'm out.

    salvadorveiga, I concur!!

  • Report this Comment On June 12, 2009, at 10:33 AM, IMHarvey wrote:

    Holding anything for a long period of time has never been a good idea, and even less so today. In our economic system, money moves rapidly and constantly, so while you're sitting on your money for a long period of time, a lot of people are using/moving your money and making big profits, and in the end you'll get a few scraps back after sitting on it for ten years. If a 8-12% return on your investment after several years seems good to you, then fine, but in reality it's a very paltry sum compared to what other made with your money in the same time period. And as many of you know, after ten years you may be even be down, not up.

  • Report this Comment On June 12, 2009, at 10:40 AM, semigator07 wrote:

    "In the short term the market judges, in the long term it weighs."

    One should take a two pronged approach. While true "Set and forget" is dead, one's portfolio should be anchored with solid dividend payers that have been steady through the ages. This portion of the portfolio shoul de on dividend reinvestment. The sequities in this portion of the portfolio whould be reviewed at least semi-annually.

    The other portion of the portfolio is the short term play portion. This is where your risk tolerance comes into play. Selections for this portion of the portfolio should be where growth stocks etc. are actively managed, being tracked on an ongoing active basis.

    I'm not suggesting dabbling in the latest "hot tip", but rather plays like MFs recommendation of Garmin are handled. Garmin was a classic example. Anyone who bought Garmin when MF recommended it reaped handsome rewards as long as they paid attention, as I did, and got out when Garmin's competitve moat deteriorated and competition heated up. Middleby is another classic example. This stock has done very well, but at some point it will cease to be a growth stock and will get hammered.

  • Report this Comment On June 12, 2009, at 2:18 PM, dchabino1 wrote:

    As it always seems to be the case with answers regarding investing... the answer is it depends. It depends on the investor's goals, and it depends on the investor's overall strategy.

    I don't think a buying or selling decision should be made based upon how long an investment is held. I think they simply should match. If your buying strategy makes heavy use of qualitative analysis, then your selling strategy should match. It takes time for things like good management, a good business plan, etc. to play out. However, I think a selling strategy should be very simply to sell when the reasons why you bought no longer apply. That could be one month, or it could be 30 years. So, I don;t think buy and hold is necessarily dead. It just depends on the reasons why you buy.

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

    Ask the top 100 ranked fools on CAPS whether or not they got to the top with buy and hold strategies and tactics and you will have the answer to this pointless debate. (psst, I already know the answer and so do you!)

  • Report this Comment On June 12, 2009, at 7:11 PM, knighttof3 wrote:

    I can do no better than to reproduce my post in An Open Letter:

    To every pundit telling me that LTBH is dead and trading is the way to go:

    I agree 100%. In fact, I have developed my own quant strategy. Math-based quant strategies have many shortcomings - they can't model non-linear processes very well, for example. So I have a better solution - use physics!

    The overall long-term trend of the market is up, thanks to inflation. I model this using convection in a fluid and the familiar, if non-linear, Navier-Stokes equations. Next, the day-to-day movements can be modeled by Brownian motion where each fluid molecule represents each trade. Money velocity is modeled by heat, and each security by something small that is compact and sinks when it's cold; but expands and rises in the fluid when it's hot and absorbs the money (fluid) - like a small leaf.

    In short, I will be doing my trades based on the way my tea leaves rise up in boiling water. It is the perfect model.

  • Report this Comment On June 12, 2009, at 7:16 PM, TravelingMel wrote:

    "Personally,

    I just never understood buy and hold. I mean I think it works for the long term investor that doesn't have time to spend looking at the market everyday or even every week. However, many of these people now use brokers.

    The best way I found to invest is fundamental daytrading"

    Can you post your assets? I want to see if you're richer than Buffett. If so, I might listen to you. Might.

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

    I wish it were as easy *in practice* to make money actively trading as some of your say it is. Unfortunately, we don't live on Lake Woebegone, and for every "good" active trade there is a corresponding "bad one" on the other side of the trade.

    Buy and Hold is founded on the idea that the economy generally grows at a faster rate than inflation AND that the risks to the portfolio from active trading are greater than the probable (as opposed to potential) gains.

    If you are sure that you can tell when the other guy is a sucker, then by all means, trade actively. Those of us who use LTBH will continue to understand that, on average, the active trader loses to the market, and LTBH *is* the market.

  • Report this Comment On June 12, 2009, at 10:41 PM, ynotc wrote:

    I always wonder what fools have against a trailing stop loss. I had a 5% trailing stop loss on Google that kicked in last July. I looked for another entry point as it went down but was unable to find one. Lucky for me since the market melted down. Since then I have been able to buy back at 1/3 of the price that I sold at with the stop loss. If a stock declines more than 10% in a short period of time something is wrong and the thesis needs to be re-evaluated. Having a stop loss reduces your loss and gives you the chance to examine the stock in light of the current situation weather the issue is a corporate or economic problem. Then you can decide rationally instead of emotionally if you wish purchase the stock again.

  • Report this Comment On June 13, 2009, at 1:18 AM, TMFtheEdge wrote:

    I think that it may be instructive to start with the reason for using "buy and hold". My take is that the idea of "buy and hold" comes with possibilities of hitting big multi-baggers.

    I mean, is there an alternative way with similar possibilities?

    Having said that, finding the right companies to "buy and hold" for 20 years (or more) to multibagger-hood may be an exercise that one may only have 2 or 3 chances in their lifetime to ultimately see. And is extremely difficult. I submit that even the best like Buffett and Lynch have only truly hit but a handful multi-baggers.

    But a handful is enough!

    Therefore with reflection, I support long term buy and hold as the starting foundation. Certainty not mindless "buy and hold" for poor companies. Most companies are simply not built for "buy and hold".

    Now, the real question to me is which companies are those?

  • Report this Comment On June 13, 2009, at 1:19 AM, Bilifuduo wrote:

    Ooooh, that's a complicated question. Depends on what your view of buy and hold is. If its taking some cash and dumping it into some no name stock with hopes of ten-bagging it, than buy and hold has been dead for a long time. If its a Buffett style approach, then you should be weathering the crisis right now. However, I believe that your portfolio should reflect the time you have to spend on stocks, and that it should be a mixture of both short term and long term plays.

  • Report this Comment On June 13, 2009, at 3:54 AM, dbbfool63 wrote:

    I think what we have just experienced in the past 8 months or so will give a whole new meaning as to what "Buy and Hold" means long term.

    From what I have read, and what I have always believed, "Buy and Hold" has a different meaning for most individual investors. There may also come a time when what that means can be forced to change.

    The past 6 months have been a great example of that, when you consider not only did many have to sell stock to pay bills, but also deplete a lot of there 401K's and other retirement accounts that allow you to take money out early in a personal financial crisis. the worst part of these scenarios for these people is that they will never see that money again since they probably took a loss before they even got any money out, they also had to use it for survival, saving their house, and the cost of divorces it has probably caused.

    The only way we will see that money re-enter the market is if the thieves who stole, embezzled, or the million dollar bonus some received thanks to the tax payers...oops, I mean government stimulus their company received and then left. Wow...is this a great country or what.

    Something else to consider is that the majority of individual investors have really only had roughly 15 to 20 years to invest for themselves on their home computers and even that was probably slow coming because many were skeptical when the E-trades and other online brokers and trading companies first came out.

    I'm not positive on my time lines, but you get the picture, I hope. So really, most of us individuals have not had much personal experience as for investing on our own this way. I never heard of Wall-Mart until the mid 80's. I was already 28 years old before most people could afford a complete PC and the cost of ram was outrageous.

  • Report this Comment On June 13, 2009, at 5:20 AM, daveandrae wrote:

    Is buy and hold dead?

    As Warren Buffett said, with so much wisdom..."it depends on what you're buying and holding."

    McDonalds has been a wonderful buy and hold investment for me since I began purchasing it at 13, in 2003. This company has raised it's dividend each year, since 1965. Thus, why would you ever want to sell out of a stock like this?

    Phillip Fisher was preaching Dow Chemical as a long term investment way back in 1956, and it took 53 YEARS before that company cut it's dividend.

    Thus, there are certain companies that do stand out, as outstanding long range investments. Of course, these companies are dwarfed by the many thousands of mediocre stocks listed each year on the NYSE. It seems to me that the key to success, with regard to buy and hold, is knowing the difference.

    In addition, even if you find an outstanding company for long range investment, like say, a Coca Cola, it still may not qualify for purchase at the time of study.( Coca Cola was trading as high as 89 bucks a share in 1998!) Thus, proper stock selection, combined with a grossly overpriced market quotation will still produce the same result, over a fairly long period...which is a loss on invested capital.

    David

  • Report this Comment On June 13, 2009, at 6:58 AM, Strnj1 wrote:

    "Buy and Hold" never meant "buy and put it under the mattress."

    When the Dust settles and the next long term rally is in full swing, we'll see who comes out ahead.

    ...The value buying, dollar cost averaging, long term player or the trader minus all of his fees and short term taxes.

  • Report this Comment On June 15, 2009, at 6:46 PM, plange01 wrote:

    to maximize your profits these days you need to sell more often but keep in mind your tax liability.dont reinvest your dividends automatically but collect them as cash and reinvest them yourself in whatever stock you own that is the best deal at the time.....

  • Report this Comment On June 15, 2009, at 8:08 PM, Guthree wrote:

    "The past 6 months have been a great example of that, when you consider not only did many have to sell stock to pay bills, but also deplete a lot of there 401K's and other retirement accounts that allow you to take money out early in a personal financial crisis. the worst part of these scenarios for these people is that they will never see that money again since they probably took a loss before they even got any money out, they also had to use it for survival, saving their house, and the cost of divorces it has probably caused"

    I think this is an important point. These people will miss most of this new bull market (and that's what I am convinced it is -- 1982-2000 bull, 2000-2009 bear, now a new bull) because of pressing immediate concerns. They dreamed of making a killing in a new McMansion perhaps, but now have to raid their 401Ks at rock-bottom prices to stave off foreclosure. People buying stocks now at P/E 10 will be glad to sell to those late to the party, ten years from now when P/Es are 40 and commentators will be saying "Buy and Hold is the way, why look at the past ten years since 2009....Why even if you had invested at the peak in 2007...."

    There's a term for it, but people always think that whatever happened recently will continue to happen and what happened long ago will never happen again. Very dangerous when buying stocks.

  • Report this Comment On June 16, 2009, at 1:56 AM, jerryguru69 wrote:

    This sounds like the old joke: it depends on what the meaning of what the word “is” is. I wonder if everyone is one the same page in this fatiguing debate.

    I vote YES. When I became a cognizant being in the 60’s and 70’s, BAH had a rather concrete meaning. You bought a stalwart American company, an engine of capitalism, like AT&T or GM or a utility. You held it forever; the rest of your life; until you die. When you retire, you harvest your crop.

    TMF seems to quote 10 years as a horizon, but I wonder if many journalists and everyday investors are thinking of 5 years; I know I do.

    “Buy and Forget”? In this case, any time horizon is a rather long to hold an investment and never review it occasionally.

    So here is my hypothetical question. I do a major portfolio review once a year. I chuck stocks that no longer make sense, keep the good stuff, and pick up new ones as needed. If I have chose correctly, over the years, I will have several stocks that I have held for 5 years or 10 or more. So, does this make me a BAH investor because I hold them for years, or does this disqualify me because I am happy to chuck the whole kit and caboodle once a year or more if necessary??

  • Report this Comment On June 16, 2009, at 9:06 AM, spongeLarry wrote:

    BAH = buy and hold? ha ha ... I thought you were saying "Bah! ignore the market dips and hold your stocks!"

    In my book, you are a smart investor, but you are NOT buy-and-hold because you're willing to sell off without any fundamental change in the company. Depends on what you mean by "...no longer make sense,...".

    Even the 10-year horizon has been squashed by the performance of 1999 -2009.

  • Report this Comment On June 16, 2009, at 12:19 PM, L3ONIDA wrote:

    Buy and hold done right means you stick with a stock until the underlying assumptions and/or fundamentals change...GM has been technically bankrupt for a decade and Buffett warned about 'CDS' being weapons of mass destruction at least five years ago...So anyone paying attention to the fundamentals should have stayed clear of the more toxic stocks long ago...Buy and hold done with wisdom (and dollar cost averaging) still seems the best long term strategy to me.

  • Report this Comment On June 16, 2009, at 7:35 PM, Airhead12 wrote:

    I picked up investing as a way to get away from my gambling habit. Therefore, to me, buying and holding is like sitting at that one slot machine at a quarter past midnight putting in every last dime you own. If you win, you win.... if you lose, you lose. Its fun either way. Now only if I could install some flashy lights and noisemakers on my laptop.

  • Report this Comment On June 18, 2009, at 11:54 PM, rijoker wrote:

    Buy and hold is not dead

  • Report this Comment On June 19, 2009, at 1:21 AM, joandrose wrote:

    Knighttof3 - what a clear and concise understanding of the debate ! Well done ! What brand of tea leaves are you using - mine are revolving with a vertical and increasing velocity - like the never never bird !

  • Report this Comment On June 19, 2009, at 11:21 AM, MJKpayday wrote:

    MF, I understand you are trying to live'n up your boards and your website, but the marketing on the "buy and hold, dead or alive" is becoming a bit much. Take it easy.

    MJK

  • Report this Comment On June 19, 2009, at 11:32 AM, jc09058 wrote:

    LOL, Kinghtof3. Fluid Dynamics and tea leaf reading.

    Oddly enough, fluid dynamics is a good modeling process for trading activity. It's not dependent on knowing the base state before trading began but allows for the existing activity and accounts for the trends (actions) already occurring.

    Fluid dynamics modeling has been used in weather predicting since at least the early 70's. While not perfect it does give some nice predictable trends about 70% of the time for weather and about 98% in a pure fluid environment.

    As to the tea leaves, who knows, LOL. I'm curious though, have you tried entrails using your method?

  • Report this Comment On June 19, 2009, at 11:48 AM, BaigManOnCampus wrote:

    Buy and Hold has been dead for a long time. In the world of making money and investments, people, managers, CEOs, companies, etc...can no longer be trusted. The moral degradation is so severe in this country, that there is no reason to invest my money in anything for a very long time. Those who trust a company with the idea of "buy-and-hold" are, in my opinion, the REAL fools.

  • Report this Comment On June 19, 2009, at 12:26 PM, carolinacoast wrote:

    Buy and hold FOR HOW LONG? There has to be parameters set here. this is too broad.

    This is correct. People use buzz terms like buy and hold as a derogatory term for your ability to pick good stocks. If you look at the popular Chinese stocks, I ask how long could you hold these stocks? 3 months, 2 years, ten years? What's an acceptable return? Going with these companies would make anyone in Buy and Hold look like a genius...especially in a future bull market.

  • Report this Comment On June 19, 2009, at 12:31 PM, FoolSolo wrote:

    This argument will never be put to rest. People have different investing needs and different investing styles. I certainly would never subscribe to a strategy of buying shares in any company and holding them indefinitely.

    Anyone who blindly holds any equity investment that is not performing as expected over a certain time horizon is bound to lose their hard-earned savings. There is no such thing as auto-pilot in investing, you have to assume some level of awareness and accountability for investing outcomes.

    There is often a time horizon assumed with Buy and Hold. To some it may be a 3-5 year time frame, to others it may be 5-10 years, and others 1-3 years. What time frame does it imply to you?

    Besides time frame, there needs to be some level of tracking and performance outcomes that justifies your position in the first place. You may decide to invest in a company because it is outperforming in sales, or has a great market position, or it is an innovation leader, etc. Would you still want to own the company if that justification changed?

    Then there are market conditions and trends. The market does not move in just one direction, and despite the strength and merits of any company, they seldom move against a major market trend, at least not for long. For example, the big selloff in September and October 2008, was a killer. If you held on through it all, you are probably struggling to get back to even. Had you been watching the major market averages and technical indicators, you would have noticed the market turned bearish in January, 2008, and although it did recover a bit in late spring, it turn negative again in July, long before the crash in September.

    Now, if you really like a company, and the market drops 40%, a straight buy and hold strategy that doesn't factor in market shifts like this would have made a big hole for you to dig out of.

    So, blindly buying and holding stocks is not something I would ever recommend. If you have a long investing horizon, and you have an investing style where you find good companies to invest it over a long time frame (> 3 years), then you should be keeping a close watch on those companies to make sure the reasons that made you invest in them are still intact. Additionally, you should be watching for major market trends and investing with the trends, rather than against the trends. I know this sounds like herd mentality, but it isn't. Investing with the trend means being cautious and aware of the bigger picture, and using protective measures to keep the majority of your gains.

    Fool on...

  • Report this Comment On June 19, 2009, at 4:04 PM, ScottRichard wrote:

    Hopefully, people understand a "Buy and Hold" strategy as having implicit qualifications.

    Certainly "Buy" is implicitly understood to mean selecting stocks with merit. Similarly, "Hold" should be understood to point toward a holding period within which the stock continues to have merit.

    Rather than speaking of a "Buy and Hold" strategy, I prefer Jim Cramer's "Buy and Homework" statement pointing to a relatively long holding period but diligence in seeing that a company's fundamentals remain strong.

    I suppose there is a question of how long one should hold a stock with weakening fundamentals to see if it is going to regain merit. Perhaps that is a different discussion about patience and return risk.

    (Also posted at other B&H discussions)

  • Report this Comment On June 19, 2009, at 4:13 PM, 3okcKrauts wrote:

    Buy and hold on value and fundamentals. When GE is less than $13, When WMT is less than $48.50, when Sonic is less than $9, when oil is less than $50,...........

    I'm buying and holding. Everything else is a short term trade - the ultimate video game.

  • Report this Comment On June 21, 2009, at 4:33 AM, StockTradersBlog wrote:

    Buy and hold never work for me. I change myself to be day trader

  • Report this Comment On June 22, 2009, at 1:12 PM, TheSQLGeek wrote:

    I'd say it's shifted to "buy and rebalance." Check out Alex Green's book, "The Gone Fishin' Portfolio."

  • Report this Comment On June 23, 2009, at 8:56 AM, bigboybumble wrote:

    I used to hold on to stocks but now with the economy being how it is, I have started trading quickly

  • Report this Comment On June 23, 2009, at 3:25 PM, mrchairman11 wrote:

    If buy and hold is dead, people need to cash out their 401K and start actively managing their accounts.

    Also, for those that place money in IRAs and keep adding yearly, they will need to change their method for investing as well.

    I agree that people should actively trade stocks, but to determine that buy and hold is dead is going against every system that is designed for retirement planning via investing in stocks and bonds, for the small investors.

    Also, for small investors buy and hold is a good way to get started with a low amount of money. For those people trying to get their feet wet or setting up accounts for small children, I encourage this method. Definitely beats buying government bonds for Christmas and birthdays.

  • Report this Comment On October 06, 2009, at 9:34 AM, loneranger83 wrote:

    Buy and hold is dead. Period. So then you need to decide, when to buy, sell or hold. Neither fundamental nor technical analysis proved to be successful in the adverse markets seen in 2001 and 2008. Stock prices of many fundamentally good companies declined dramatically. Technical analysis also failed as support levels continuously broke in one of the worst financial meltdowns many investors had seen in their lifetime.

    Checkout stopbuyingthebull.com -- where the theory is that big money moves markets. It uses an algorithm to find the shift in buyers and sellers over a certain threshold and then it generates signals that tell when to buy, hold or sell.

  • Report this Comment On June 17, 2010, at 7:10 AM, daveandrae wrote:

    One year later-

    My investment portfolio-

    100% equity. 0% percent cash

    McDonalds- +23%

    Dow Chemical- +66%

    General Electric- +23%

    Harley Davidson- +69%

    Pfizer- +9%

    Turnover ratio- 0%

    Total return before dividends- 38%

    S&P 500- 23%

    Is buy and hold equity investing dead ?

    Of course not.

    Is the buy and hold equity investor dead? Probably.

    Is there a direct correlation between investment performance and Investor Return?

    NO. In fact, as you can see, the two are wildly diametrical.

    Thomas Edmonds

  • Report this Comment On June 16, 2011, at 4:26 PM, daveandrae wrote:

    One year later....

    My portfolio's Investment performance

    McDonald's - 20.06%

    Dow Chemical - 31.48%

    General Electric - 20.54%

    Harley Davidson - 34.80%

    Pfizer - 36.27%

    Total return - 28.63%

    S&P 500 - 13.47%

    One mo' time....

    Is buy and hold investing dead?

    Once again, of course not.

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