Will you still Buy & Hold ?

[haha]

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]

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.

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]

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]

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]

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.