Don't Believe In Buy And Hold

Back on February 16 of this year I wrote a blog post on the end of Buy and Hold (you can read it here). Today I read an article on Forbes by A. Gary Schilling titled "Don't Believe In Buy And Hold." Here are a couple of excerpts:

"Only one of 1,700 diversified U.S. stock funds showed a gain in 2008, and that was a mere 0.4%. The average of these funds dropped 39%, precisely in line with the S&P 500's decline."

"The buy and hold devotees say you can't time the market, and if you aren't in all the time, you risk missing much of the gain. A Spanish research firm found that if you removed the 10 best days for the Dow Jones industrial average in the 1900-2008 years, two-thirds of the cumulative gains were lost. But if you missed the 10 worst days, it found, the actual gain on the Dow tripled. These results are in line with our earlier research and reflect the fact that stocks fall a lot faster than they rise."

Here is my favorite part of the article. I was shocked by this:

"Our all-time favorite graph shows the results from investing $100 in a 25-year zero-coupon Treasury bond at its yield high (and price low) in October 1981, and rolling it into another 25-year Treasury annually to maintain that 25-year maturity. On March 31, 2009, that $100 was worth $16,656 with a compound annual return of 20.4%. In contrast, $100 invested in the S&P 500 at its low in July 1982 was worth $1,502 last month for a 10.7% annual return including dividend reinvestment. So Treasuries outperformed stocks by 11.1 times!"

I had no idea that this was the case or even possible. Obviously there is still much to learn. My premise has been that Buy and Hold investing may indeed be over which is why I created this blog and the Buy and Hold vs. Active Management ETF Investing experiment. Only time will tell which is the better strategy. You can read the complete Forbes article here.