A very thoughtful questioning of the buy and hold strategy to investing in equities..

[DblDoc]

You would be wise to heed some of his advice.

Such as this:

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Analysis of market history must be objective, and must not focus on markets or time periods that create unrealistic expectations, and thus false hopes.

How about we don't focus on a cherry picked time period to create false doom and gloom and thus terrify the reader and hope they will see the light and become a client.

And then there is this:

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Be skeptical of the market historian whose goal is to sell a product or a service. Ask yourself if they have a conflict of interest. In fact, every market historian should be read with a healthy dose of skepticism.

Especially given this:

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Roger Schreiner is the founder and CEO of Schreiner Capital Management, Inc. (SCM), an SEC-registered investment advisor located in Exton, Pennsylvania;

DD

[LARS]

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Originally Posted by DblDoc How about we don't focus on a cherry picked time period to create false doom and gloom and thus terrify the reader and hope they will see the light and become a client.

I do not see how the author is cherry picking at all in the case of Japan. As I already stated anyone purchasing and holding equities at any point between 1989 and approximately 2004 has lost money. That is a 15 year period! The charge of cherry picking misses the forest for the trees.

[DblDoc]

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Originally Posted by LARS I do not see how the author is cherry picking at all in the case of Japan. As I already stated anyone purchasing and holding equities at any point between 1989 and approximately 2004 has lost money. That is a 15 year period! The charge of cherry picking misses the forest for the trees.

He chose the peak to now. How is that "not" cherry picking. How has it done from 1943 until now? As already pointed out he creates a straw man investor who only buys the Nikkei and then does nothing until now. There is nothing new here. Stocks lose money. Sometimes over long periods of time. That is why they are risky. If they didn't there would be NO potential for reward. This is the same old marketing by an active manager trying to enlist new clients. Caveat emptor .

DD

[LARS]

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Originally Posted by DblDoc He chose the peak to now. How is that "not" cherry picking. How has it done from 1943 until now? As already pointed out he creates a straw man investor who only buys the Nikkei and then does nothing until now. There is nothing new here. Stocks lose money. Sometimes over long periods of time. That is why they are risky. If they didn't there would be NO potential for reward. This is the same old marketing by an active manager trying to enlist new clients. Caveat emptor . DD

This isn't an issue of stocks losing money. The ENTIRE market lost value for 15 years. No matter when you bought in Japan.

It is a straw man argument to keep focusing on the example of a person buying 1989.

The real issue of the article is: what are the chances that the US equity markets will face a similar fate? And if so, buy and hold is not the correct strategy. Full stop.

That is an issue worthy of debate: not cherry picking.

[Gone4Good]

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Originally Posted by LARS The real issue of the article is: what are the chances that the US equity markets will face a similar fate?

Yes, but that question precisely relates to the data set used. The Nikkei more than tripled in the three years prior to 1989 (from about 12,000 to 38,000). How does that at all relate to the U.S. markets today?

[LOL!]

OK, buy-and-hold a 100% equity portfolio is not the correct strategy. Well, duh!

Who would actually ever do that? Who actually ever did that? Really? Run a poll or something. Find me an investor who actually did that. Find me anybody who ever recommended that.

[DblDoc]

Quote:

Originally Posted by LARS This isn't an issue of stocks losing money. The ENTIRE market lost value for 15 years. No matter when you bought in Japan. It is a straw man argument to keep focusing on the example of a person buying 1989. The real issue of the article is: what are the chances that the US equity markets will face a similar fate? And if so, buy and hold is not the correct strategy. Full stop. That is an issue worthy of debate: not cherry picking.

Entire markets have lost money before. The entire world equity market lost big in 2008-2009. It will happen again. Neither he nor you have demonstrated that a Japanese investor that was diversified, buying and holding and rebalancing would have had (-) returns over that 15 year period.

So what are the odds of a similar pattern in US equities? I'd say they are low, but just in case by the time I retire I'll have sufficient cash and bonds to weather out such a period.

DD

[clifp]

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Originally Posted by LARS This isn't an issue of stocks losing money. The ENTIRE market lost value for 15 years. No matter when you bought in Japan. It is a straw man argument to keep focusing on the example of a person buying 1989.

No not really it tells the Nikki average of 225 stocks was lower in 2004 than any point in the last 15 years. It really doesn't tell a lot about a how an investor in Japanese stocks has done over a long period. It ignores the impact of dividends, dollar cost averaging, investing in smaller cap stocks etc. Most importantly it ignores a buy and hold strategy over your entire working career which as I show isn't good but it isn't horrible.

Now not speaking or reading Japanese I couldn't find a lot of data on the Japanese stocks with in a few minute Google search. I'd be much more interesting in seeing the long term returns off monthly investment in the Japanese equivalent of Vanguard Total Stock Market Fund much like a 401K investment. That would be interesting article not a simplistic lets look at the Nikkei and use it a straw man for why buy and hold is dead.. It would be also be interesting to see how a retiree in Japan with a 50/50 AA and annual rebalancing would have fared over the last 20 or 30 years.

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The real issue of the article is: what are the chances that the US equity markets will face a similar fate? And if so, buy and hold is not the correct strategy. Full stop. That is an issue worthy of debate: not cherry picking.

I agree it is that returns of the US stock market over the next decade or so is worthy of the debate and even agree that horrible performance of the Japanese stock market (or at least the Nikkei) is a cautionary tale.

But if you think US stocks are going down for a decade the right investment strategy is to not buy them at all period. If that is your view and I don't think it is crazy (or at least less crazy than I thought a couple of years ago), than don't buy stocks. I just don't see how the Japanese stock market makes a case for active investment. Bad marketing timing could have made the a bad situation worse.

If you think that market timing could have have saved the average investor in Japan than I'd say prove it.

[LOL!]

Maybe start another thread to ask if "buy-and-hold" literally means buy a portfolio of 100% equities and walk away holding it forever. Or does it mean it buy your asset allocation, add new money either from salary or dividends along the way, rebalance, tax-loss harvest, and manage that asset allocation over time?

I don't think we could find any investors using the literal meaning unless they were in a coma without a custodian. In that case, their state's unclaimed assets office might have already confiscated their holdings.