Will you still Buy & Hold ?

[DblDoc]

Quote:

Originally Posted by kumquat -Interest rates may go much higher. Not good for stocks. Worse for bonds -Inflation may go much, much higher (where does the money come for all these bailouts?) Not good for cash or bonds -Stocks on a historic basis aren't really "cheap". Things got so inflated in the 90's, looking at p/e's and ratios are dangerous. The "e" in p/e could keep deflating. Many good companies are selling foe P/e's of 0.5 - 4.0 -Japan L shaped depression? Are you investing in Japan? look world wide. There's still much downside in stocks, and the upside over cash is minimal (maybe a few percent over cash?). Inflation? I don't know either but in my mind they are the best bet.

All very good points.

There is a parrallel thread at the Bogleheads site, HerbertSitz post I think does a good job of summarizing why buy and hold is a good strategy: Bogleheads :: View topic - is this the time to stay the course? (part 2)

DD

[harley]

I think I'll build my fortune going forward like the Kennedys and others did. Black markets! I think there's good money to be made there, when everything else is going to hell.

[freebird5825]

"Ti-i-i-ime is on my side, yes it is" - Mick Jagger, Rolling Stones.

BUY and HOLD. if Jack Bogle sez it's good to go, then it's good to do.

[slazenger]

Quote:

Originally Posted by Notmuchlonger So what metric should I use to pull my money in and out of the market? Guess Im not smart enough Ill stick with the buy and hold method.

I don't want to get too deep into a discussion over this, but just to speak generally, the last two bubbles of the past decade (late 99' and the more recent mid 07') the market was very overpriced from a valuations perspective before the crash. Maybe that was just coincidence, but my common sense gut tells me it wasn't.

I would never advocate going "all in" then suddenly "all out", and I really don't like any timing method that has you making moves weekly, but I do see a lot of sense in, say, taking a hard look at your portfolio annually, and making 10-30% adjustments in weightings given the current factors.

But yeah, if you really feel like you have no idea what's coming next, then do no harm and be a pure buy-and-holder. That's better than several alternatives. I recommend buy-and-hold percentage portfolios to guys at work all the time who have no intentions of analyzing their portfolio annually, following technical indicators, reading tons of market climate articles, etc... stuff like I like to do.

[Meadbh]

Quote:

Originally Posted by harley Don't worry. We'll also be watching carefully and we'll get back in before it jumps 30%.

You'll need this, then....

[Architect]

Buy and hold has worked terribly for me. I started investing around 1995, and caught the dot.com. In 2005 I checked, and found that after a decade I came up above water. Ten years with nothing to show for it! Meanwhile I suspected a crash coming up and so sold and went to bonds.

If I had followed religion and stayed the course, today I would have lost money on every single purchase I made during my entire investing career, using buy and hold. As it is I have a 14% total return, 1% annualized, with my 401k short-intermediate bond fund (I have a far better return on my aggressive bond investing outside of the 401k).

Now sure, the academics will say "it's for the long term, in 20 or 30 years you'll have some great returns". Maybe. I'm understandably much more cautious with the buy/hold strategy than somebody who started using it at the beginning of a secular bull, rather than a secular bear as I did.

Investing in bonds last year have given me the first positive returns in my lifetime.

[FUEGO]

Quote:

Originally Posted by Architect If I had followed religion and stayed the course, today I would have lost money on every single purchase I made during my entire investing career, using buy and hold. As it is I have a 14% total return, 1% annualized, with my 401k short-intermediate bond fund (I have a far better return on my aggressive bond investing outside of the 401k). Now sure, the academics will say "it's for the long term, in 20 or 30 years you'll have some great returns". Maybe. I'm understandably much more cautious with the buy/hold strategy than somebody who started using it at the beginning of a secular bull, rather than a secular bear as I did.

What were you invested in??! Buying into the SP500 during 1995 when it was trading between 460 and 620 and selling today at 863 (plus 13 years of dividends) would produce positive returns, right?? Did you invest in a well diversified portfolio starting in 1995 or the hot stock/fund du jour?

I still haven't seen a better investment strategy than buying and holding long term a portfolio of well diversified asset classes that match your risk tolerance. Maybe like democracy, buy and hold is the worst form of investing, except for all the rest?

[charlie]

Would I still buy and hold? Yes ....... for the time being anyway.

Cheers,

charlie

[Darryl]

As previously stated this thread should be divided between retirees and those still working.
In the still working camp probably 10 more years and I'm also just salivating at the pricing levels. I told my wife I'd just love to do a HELOC and put it in the market, she tensed up more than a little before I said don't worry that's not our plan.
We picked an AA plan that is true to our risk tolerance so we actually stick with it. A LBYM lifestyle (preaching to the choir here) and the discipline to run our plan will produce your best potential outcome. The aggressiveness gets to use good asset placement and TLH techniques to help things along and a little sloppiness at rebalance time but LOL gave me permission to call it opportunistice rebalancing so I don't have to feel bad about being a DMtimer.

[freebird5825]

this may sound very simplistic...and by all means throw darts ...but allow me to think out loud, if i may:
one teeny tiny fact often overlooked is if you reinvest all cap gains and dividends, you get more shares over time. more shares than the sum total you purchased all at once or thru DCA. that in itself is a gain for buy and holders. correct?
a temporary drop in NAV or share price, no matter how dramatic, doesn't mean squat for ROI until you redeem. if you have to redeem, all bets are off. buy and hold is negated by buy and redeem in the short term.
if doing a partial reedemption, more shares means more time til your number of shares goes to zero.
if you are in a position to have to redeem now and at a fast clip, vs wait for a recovery, then an agressive stock AA is the wrong place to be.
nobody is happy about the ferocious bear, but it does not seem to me to be a valid reason to dump "buy and hold" as a LONG TERM investment strategy.
go ahead...fire away...

[haha]

Quote:

Originally Posted by freebird5825 a temporary drop in NAV or share price, no matter how dramatic, doesn't mean squat for ROI until you redeem. if you have to redeem, all bets are off. buy and hold is negated by buy and redeem in the short term. if doing a partial reedemption, more shares means more time til your number of shares goes to zero. if you are in a position to have to redeem now and at a fast clip, vs wait for a recovery, then an agressive stock AA is the wrong place to be. nobody is happy about the ferocious bear, but it does not seem to me to be a valid reason to dump "buy and hold" as a LONG TERM investment strategy. go ahead...fire away...

I think you are right on. Trying to build a retirement fund is really different from living from that fund once you retire. It is pschologically different, and mathematically different. With more experience, we may find that trying to fund retirement with a high stock allocation is very risky, unless the retiree can completely get by on annuity type income such as pension and SS if necessary. The Dow is a pretty staid collection of stocks, and a few days ago it had lost over 50% in just a tad over a year.

Even if it comes back pretty well, assuming a 100% stock allocation(not that many would try this, but as an illustration) and assuming a starting WR of 4%, we now are withdrawing at 8% pa, or 8/12 =.67% per month. So if the market essentially goes nowhere for a year after the 50% break, our retiree will be down to $100,000,000-500,000-40,000, leaving her with only $460,000., assuming she can cut back and not take the inflation adjustment. If this market level is maintained, with unpredictible ups and downs, or just steady, she will be down another $40,000 after the second year, to $420,000. Needing $40,000 per year, and sooner or later running up against inflation adjustments that will have to be made if her lifestyle is not to be seriously damaged. Would she retire with $420,000?

I doubt that she would.

Ha

[NW-Bound]

Quote:

Originally Posted by Architect Buy and hold has worked terribly for me. I started investing around 1995, and caught the dot.com. In 2005 I checked, and found that after a decade I came up above water. Ten years with nothing to show for it! Meanwhile I suspected a crash coming up and so sold and went to bonds.

Quote:

Originally Posted by FUEGO What were you invested in??! ?

I have the same question.


Now, about "buy and hold".

I did not vote because I didn't know if my definition of "buy and hold" was the same as everyone else's.

I bought stocks and held them until their fundamental changed. Now, sometimes I was able to see that a stock became overvalued, or that the company's prospect was about to get worse. But, most of the time, what saved me was that I tried to maintain a "sell discipline". I tried to limit my losses, and get out when I was down to 50c on the dollar. I still ride some stocks down to near zero, but I have done that less and less over time.

Now, that works only with individual equities, not with mutual funds which have much less volatility. Limiting individual stocks to 50% loss is not the same as limiting your MFs to 50%!

An economic downturn such as the dotcom bust or this current event affects some stocks sooner than others. When I saw that the malaise started to spread from one bubble-infected sector, such as tech in 2001-2003 and financial in this present time, to other sectors in the economy, it was time to sell some to raise cash.

It worked for me, except that I got back in too soon. Who would have thought that so many stocks got taken down to single-digit P/Es? Still, I have not bought all back in, and at this point still have 56% in cash.

And by the way, when I was fully invested at 70% equity, I had around 100 positions. I like to run my own mini mutual fund.

[Architect]

Fidelity 401k. Diversified among, I forget exactly now, 5 funds, large cap, small cap, international ... never had to rebalance them, they all went up together, and down together.

Try this, I got a lot of money from selling my house (and renting, waiting for The Price Is Right in 2010). What to do with the money? Say I had DCA'd into a usual diversified set of Vanguard funds in 2005-2007, I suspect I'd be far underwater presently. Smelling recession in the air I did what you're not supposed to do, and put it all into long Treasuries which have done very well. Got lucky? Maybe, I did my homework though, being suspicious that this wasn't the decade(s) to buy and hold.

[DblDoc]

Quote:

Originally Posted by Architect Fidelity 401k. Diversified among, I forget exactly now, 5 funds, large cap, small cap, international ... never had to rebalance them, they all went up together, and down together. Try this, I got a lot of money from selling my house (and renting, waiting for The Price Is Right in 2010). What to do with the money? Say I had DCA'd into a usual diversified set of Vanguard funds in 2005-2007, I suspect I'd be far underwater presently. Smelling recession in the air I did what you're not supposed to do, and put it all into long Treasuries which have done very well. Got lucky? Maybe, I did my homework though, being suspicious that this wasn't the decade(s) to buy and hold.

Assuming you needed the money in ~ 2010 to buy another house the market would be the wrong place for it as the time frame was way to short. Treasuries were the perfect choice in that situation.

DD

[free4now]

If I didn't buy and hold I wouldn't be in the market at all. It's the only way to deal with the volatility for me.

[free4now]

There is a part of me that feels like a chump for not having noticed that the market keeps going down and more bad news keeps appearing just when the last piece of bad news was being forgotten. But my crystal ball isn't showing how long that will last, so I'm not going to bet on the bad news continuing.

[ejman]

Quote:

Originally Posted by Architect Buy and hold has worked terribly for me. I started investing around 1995, and caught the dot.com. In 2005 I checked, and found that after a decade I came up above water. Ten years with nothing to show for it! Meanwhile I suspected a crash coming up and so sold and went to bonds. If I had followed religion and stayed the course, today I would have lost money on every single purchase I made during my entire investing career, using buy and hold. As it is I have a 14% total return, 1% annualized, with my 401k short-intermediate bond fund (I have a far better return on my aggressive bond investing outside of the 401k). Now sure, the academics will say "it's for the long term, in 20 or 30 years you'll have some great returns". Maybe. I'm understandably much more cautious with the buy/hold strategy than somebody who started using it at the beginning of a secular bull, rather than a secular bear as I did. Investing in bonds last year have given me the first positive returns in my lifetime.

I don't know what your investing asset allocation was but I just ran my numbers thru quicken and it shows my portfolio RR since 1/1/95 thru yesterday is 6.4% per year on a plain vanilla allocation of 60% stock and 40% bonds/cash mostly in low cost Vanguard funds. Sometimes the simpler the better and leave it alone!

[unclemick]

15th year of retirement.

Target Retirement 2015 on full auto deduct to Prime MM once a yr.

Auto rebalances and shifts asset class mix as the clock ticks on.

I reset it the start of every year between SEC yield and 5% variable depending on if the crystal ball says 'hard times' or bon temps rolliere.'

heh heh heh - the chick with the crystal ball looks 'hot' - with my dirty old man glasses on.

[Alan]

Quote:

Originally Posted by ejman I don't know what your investing asset allocation was but I just ran my numbers thru quicken and it shows my portfolio RR since 1/1/95 thru yesterday is 6.4% per year on a plain vanilla allocation of 60% stock and 40% bonds/cash mostly in low cost Vanguard funds. Sometimes the simpler the better and leave it alone!

Ditto, I am buy and hold, all MF's and re-balance twice a year. My return over this period is 7.2% per year. In 1995 I was 70/30/0 and as I got closer to RE in 2010 moved to my current position 40/50/10.