Is Buy and Hold Investing Dead?

March 9, 2009 at 7:35 pm Leave a comment

The historical market statistics are certainly horrendous.  Over the last 10 years, one’s investment in a market index declined by some 20%.  2008 was the w0rst year for Nasdaq ever and second worst (after 1931) for Dow Jones.  January of this year was the worst January on record.  So far this year, the market is down 25% — more than the celebrated market crash of 1987.  S&P 500 currently trades at 1996 levels — that’s 13 years of zero return.

With data like this, and old investment philosophy of buy and hold comes under strong scrutiny, as “Mad Money” host Jim Cramer likes to point out, among many others.   However, horrible as it is, markets had similar “dead money” periods — one during the Great Depression, and another more recent one from 1967 to 1982.  Both of these periods were followed by strong gains.  In fact, while it is natural to assume that the next 13 years will follow the same pattern as the preceding 13 years, usually that is not the case.

This article from Fortune was published in October of last year, when the market was significantly higher.  Nevertheless, it still applies to the current situation.  Buy and hold is not dead, it is just dormant at the moment, but it will wake up.

Entry filed under: Market Conditions.

Recap of Recent Events End of Mark to Market?

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Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.


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