Buy and Hold

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Spaf

Spaf

Honorary Hall of Fame Member
Investments by age, using buy and hold.​

Don't know where I found this. But I thought it was worth sharing!

1.
AGE 26-45: AGGRESSIVE
Now is the time to be brave. Invest in higher risk stocks with greater growth potential.
100% in stocks
0% in bonds
0% in cash

2.
AGE 45-55: GROWTH
These are the peak earning years. Broadly diversify your stock portfolio.
90% in stocks
10% in bonds
0% in cash

3.
AGE 56-65: BALANCED
The house is paid off and the kids are out of college; focus on higher – dividend – yielding stocks.
60% in stocks
30% in bonds
10% in cash

4.
AGE 66-75 CONSERVATIVE
High – dividend – yielding equities such as utility stocks are the way to go during the early retirement years.
10% in stocks
70% in bonds
20% in cash

5.
AGE 76+ SHORT-TERM
With no wages and a supersafe portfolio, your return starts to suffer and your savings begin to dwindle – but you should be OK with what you have left.
0% in stocks
10% in bonds
90% in cash
 
John Bogle (Vanguard founder) suggests that you take your Social Security and defined benefit pension, e.g. FERS, into account when allocating your assets. For example:

SS: $20,000
FERS: $40,000

$60,000 X 14 =s a $840,000 bond allocation. If you had $1,000,000 in stocks your total allocation would be:

$840,000 + $1,000,000 = $1,840,000

stocks: $1,000,000/$1,840,000 = 54%
bonds: $840,000/$1,840,000 = 46%

Taking SS and defined pension benefits into account allows an older person to take a more aggressive stock allocation than might be readily apparent from various rules of thumb, e.g. a bond allocation equal to your age.:)
 
Some Investing Concepts for Your Consideration

1. Risk and return are related. Higher risk enables potentially higher returns. There are no low risk/high return investments. However, Fama/French have found that value stocks have higher returns and lower volatility (risk) than the market. Consequently, they claim that value stocks represent a different kind of risk. If so, the acceptance of higher risk to receive higher returns holds.

2. Asset classes define assets with distinct risk and return characteristics.

a. Equity: Large stocks, small stocks, value stocks, growth stocks, foreign stocks, and REITS

b. Fixed income: domestic corporate bonds, government bonds, long bonds, short bonds, T-bills, foreign bonds, and cash.

3. There are two basic investment approaches: active and passive. Active investors try to pick stocks and/or time the market. Passive investors focus on asset allocation, low cost, and obtaining what the market offers.

4. Researchers have developed the theory of efficient markets - the Efficient Market Hypothesis (EMH). Essentially, in an efficient market it is fruitless to try and time the markets. At any given moment the price of a security incorporates all that is known about that security. Furthermore, it doesn't make sense to talk about the market being over priced or under priced. The current price is the best estimate of the current true price. Most of the research supports some kind (weak, strong) of efficient market.

5. Active managers and investors believe that markets are not efficient and there are mispricings to be exploited, e.g. the market is under or over valued. Although active investors may concede that the S&P 500 or the total domestic stock market is efficient, they believe that global markets, especially emerging markets, and small stocks are not efficient and therefore, offer mispricing opportunities to be exploited. Ironically, the efficient market requires active investors to maintain its efficiency. Active investors use fundamental and/or technical analysis to attempt the discovery market inefficiencies.

6. The returns of active managers can be primarily (95%) explained by the Fama/French Three Factor (FF3F) model, i.e. beta, the size premium, and the value premium. Consequently, the alphas achieved by some, if not all, active managers can be explained by asset allocation, not stock picking expertise
 
I've discovered over the years that the majority of technical analysis is no better than a wind sock - but I still look at it. Though most of it is irrelevant bull hockey. I'll stick with my Ducati and ride the cycles I enjoy the thrills.
 
The Case Against Market Timing

The following quotes were posted by Taylor Larimore in the Vanguard Diehards forum. Taylor is one of the authors of the The Bogleheads Guide to Investing:

As a former market timer, I learned that it pays to listen to investment authorities:

"It's extremely rare to hear of anyone winning at it (market timing) over a period of years. Indeed, I've never heard of such a genius." Jack Brennan, Vanguard CEO

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two." Warren Buffet

"If I have noticed anything over these 60 years on Wall Street, is is that people do not succeed in forecasting that's going to happen to the stock market." Benjamin Graham

"Forget about timing the market, it doesn't work. You'll lose money. Invest for the long haul and then sit back and wait--the market always goes up in the long-run." Paul Farrell, CBS Marketwatch

"Market-timing is bunk." Pat Dorsey, Morningstar Director of Fund Analysis.

"There will always be someone predicting disaster and someone predicting great fortune. At one time or another, each will be closer to correct than the other. But it won't matter to you if you understand this and have invested responsibly. You have a long-term plan; stick with it." Peter Lynch

"The market timer's Hall of Fame is an empty room." Jane Bryant Quinn, Author, Columnist

"Market Timing is a poor substitute for a long-term investment plan." Jonathan Clements, Wall Street Journal

"Market timing is an ineffective strategy for mutual Fund Investors." CDA/Wiesenberger

"The only way to make money with a (market timing) newsletter is by selling one." Malcolm Forbes

"Nobody but nobody, has consistently guessed the direction of the bond or stock market over any meaningful length of time." John Markese, President, AAII Journal

"I've learned that market timing can ruin you." Elaine Garzarelli, former Wall Street forecaster.

"Among the 160 or so newsletters the HFD monitors, the market timing recommendations of only 10 have beaten the stock market over the last decade on a risk-adjusted basis." Mark Hulbert 1-18-01

"As you can probably sense, we're not keen on market-timing. It just doesn't work." Morningstar's Course 106

"Over a 12.5 year period, 224 of 237 market timing newsletters went out of business." indexfundsadvisors.com

"I'm a strong advocate of buying and holding." Charles Schwab

"Buy and hold is a very dull strategy. It lacks pizzazz and doesn't inspire much admiration at cocktail parties. It has only one little advantage: It works, very profitably and very consistently." Frank Armstrong, Author

"For most investors the odds favor a buy-and-hold strategy." Carol Gould, New York Times

"There is absolutely no evidence that anyone can time the market." Bill Bernstein, author and advisor.

"Some people in the popular press talk about 'getting into' a bull market and 'getting out of' a bear market, but it is all marketing hype." Rick Ferri, Author and advisor

"Only liars manage to always be 'out' during bad times and 'in' during good times." Bernard Baruch

"It must be apparent to intelligent investors who if anyone possessed the ability to do so (market-time) he would become a billionaire so quickly he would not find it necessary to sell his stock market guesses to the general public." David L. Babson, famed investor

"There is an overwhelming body of evidence to support the view that believing in the ability of market timers is the equivalent of believing astrologers can predict the future." Larry Swedroe, author and advisor

"Don't trade in and out of funds. Stay invested.-- Not only does buy-and-hold investing offer better returns, but it's also less work." Eric Tyson, author Mutual Funds for Dummies

"Investors should look with a jaundiced eye at any market timing system being peddled by its guru-creator" W. Scott Simon, author

"Don't waste money subscribing to investment letters or expensive services.--Besides their cost, there is the problem that they are liable to tempt you into buying, and scare you into selling." Andrew Tobias, author

"If you buy--and then hold--a total-stock-market index fund, it is mathematically certain that you will outperform the vast majority of all other investors in the long run." Jason Zweig, Money magazine

"The facts suggest that successful market timing is extroardinarily difficult to achieve." Burton Malkiel, author of Random Walk

"If we haven't said it enough, we'll say it again: Market timing is dangerous." Barron's Guide to Making Investment Decisions

"Timing the market is for losers. Time IN the market will get you to the winner's circle, and you'll sleep better at night." Michael Leboeuf, author of "The Millionaire in You"

"Stay the course. It is the most important single piece of investment wisdom I can give to you." Jack Bogle"

Best wishes.
Taylor
 
They always are quick to tell you what their YTD or Monthly performance against the S&P is, but they'll never truthfully tell you what their 5 year 'Market Timing' Stats are. More often than not the I hear is, "I used to Day Trade."
 
Birchtree said:
I've discovered over the years that the majority of technical analysis is no better than a wind sock - but I still look at it. Though most of it is irrelevant bull hockey. I'll stick with my Ducati and ride the cycles I enjoy the thrills.
Click to expand...

I thought windsocks were pretty reliable :nuts:.
 
Ya, I don't bunny hop every time the weather changes. Get ready for the second half - be right and sit tight.
 
So, are you "buy and hold" guys saying that this business of trying to move $$ between the TSP funds is crazy? Or is this about individual stock trading?
 
The easiest way to build long-term wealth is to extend one's time horizon, be a contrarian, and compound dividend yield. I have followed these principles while building my base and now that I've arrived I plan to pistol shoot my way to even greater gains taking opportunity of market volatility. So this buy and holder of many years is and has been preparing to enter the bull ring of the timer to collect my greedy share. I won't be a day to day trader but rather a position swing trader. My advice is to learn before you churn - because the potential in this type of market is enormous in both directions.
 
Birchtree said:
The easiest way to build long-term wealth is to extend one's time horizon, be a contrarian, and compound dividend yield. I have followed these principles while building my base and now that I've arrived I plan to pistol shoot my way to even greater gains taking opportunity of market volatility. So this buy and holder of many years is and has been preparing to enter the bull ring of the timer to collect my greedy share. I won't be a day to day trader but rather a position swing trader. My advice is to learn before you churn - because the potential in this type of market is enormous in both directions.
Click to expand...


Learn before you churn! I like that.

YM
 
The more I learn, the more I think investing strategies are a matter of "belief". Either you believe you can beat the market or you don't.

I believe I can't. Most TSPTalkers believe they can.

However, for those who aren't sure (or are losing their confidence in this market), this 2004 Money article may prove interesting.

I particularly liked the assertion that many institutions, like individual investors, select money managers by "hire high" and "fire low" criteria.

http://money.cnn.com/2004/02/19/magazines/moneymag/investing_20yearportfolio_0403/index.htm

In addition, John Bogle suggests that foreign bonds should be part of a long-term portfolio. He argues that we can't be sure that the U.S. will be on top 20 years from now. Unfortunately, foreign bonds are yet another asset class - along with REITS, Small Value, Small Foreign, and Emerging Markets - not offered by TSP.

The TSP board is somewhat schizophrenic. They want us to passively invest according to the Efficient Market Hypothesis. However, they don't offer enough asset classes to make it really effective.:cool:-----Jim

Incidentally, my Quicken projected return for 2008 is -70%. So what do I know! :sick:
 
The link outlines the five essentials to investing: http://investingessentials.blogspot.com/2006/02/chapter-1-five-essentials-making-sense.html

[FONT=Arial,sans-serif]The following is an excerpt. My comments are in italics.[/FONT]

[FONT=Arial,sans-serif]"Here are the five investing essentials necessary to successfully use the portfolio investment method. Note that these essentials are necessary for any long term investing strategy, with one exception: The portfolio selection method requires the use of mutual funds because of their advantage in getting full diversification, which is almost impossible using individual stocks.[/FONT]


[FONT=Arial,sans-serif]1. Decide on an asset allocation that fits your needs. Asset Allocation is simply the percentages of your money you plan to place (allocate) into stocks, bonds and cash. It determines most of your investing risk.[/FONT]

[FONT=Arial,sans-serif]Your TSP stock allocation should include all three TSP equity funds, i.e. C, S, & I, and approach the world market capitalization - 50% domestic and 50% international.[/FONT]

[FONT=Arial,sans-serif]2. Diversify your holdings. Diversify means placing some money in different kinds of mutual fund investments in order to spread your risk and take advantage of Markowitz's discovery.[/FONT]

[FONT=Arial,sans-serif]Diversify among cash (G Fund), bonds (F Fund), and equities (C, S, & I) funds.[/FONT]


[FONT=Arial,sans-serif]3. Keep costs as low as possible. Whatever you spend on buying and maintaining your investments comes directly out of the returns you receive.[/FONT]

[FONT=Arial,sans-serif]Fortunately, TSP has the lowest cost funds available.[/FONT]


[FONT=Arial,sans-serif]4. Rebalance your portfolio when necessary. Your portfolio is like a file folder - it contains all your various investments. Rebalancing is simply readjusting your allocation percentages back to where you originally set them. They will get out of line from time to time because of increases or decreases in your different kinds of investments.[/FONT]

[FONT=Arial,sans-serif]Rebalance to maintain a constant level of risk. If you let your allocation drift, your risk profile will change. Investors that let their allocations drift as the C fund produced out sized returns got zapped in 2000.[/FONT]


[FONT=Arial,sans-serif]5. Formalize your investment plan. Developing a plan and then writing it down is a way of demonstrating your commitment. It also serves as a compass to insure you stay on course.[/FONT]

[FONT=Arial,sans-serif]Keeps you from panicking and changing your risk/return profile. [/FONT]


[FONT=Arial,sans-serif]That's it. Note that these essentials aren't going to involve something you can't follow. There is no need for "Wall Street" language or complicated strategies. The essentials are all you really need to invest effectively and get higher-than-average returns.[/FONT]
 
Buy and Hold is Dead!
On an individual basis, the sad reality is most funds simply want to beat their target benchmark. To do that they frequently feel they must be fully invested 100% of the time. Then by throwing out a few obvious dogs and overweighting a few top performers, managers can beat their target.
Steve noted his "best of the best" diversification strategy beat the market by a few percent. Unfortunately, on an absolute Return basis, -35% is a horrible year no matter what the benchmark is. Note that the -38.5% decline in the S&P wiped out all gains for the last 12 years.
Click to expand...
http://globaleconomicanalysis.blogspot.com/2009/07/another-nail-in-buy-and-holds-coffin.html

Long Live Buy and Hold!
Successful market timing requires three key ingredients: a reliable signal to tell you when to get in and out of stocks (or bonds, gold and other types of investments), the ability to interpret the signal correctly and the discipline to act on it. The popular image of market timing is that it calls for making drastic, all-or-nothing moves into and out of a particular market.
In reality, many timers adjust their investments in stages, and their recommendations don't always reflect such a black-and-white view of things. And while some timers may trade frequently, others use signals that rarely change from buy to sell or vice versa. In any case, timers say that being out of the stock market during its most uncertain periods results in a smoother ride for your portfolio compared with a buy-and-hold approach.
Click to expand...
http://finance.yahoo.com/focus-reti...e-the-market.html?mod=fidelity-buildingwealth
 
Michael Covel fired this off at a reviewer of Trend Following at Amazon.com. Some sorry reviewer claimed to be a buy and fundamental Warren Buffet investor. Ha. Unless you're an insider, you're not trading on fundamentals.

One of the original Turtle Traders, I'd love to see Covel cross horns with a boglehead.

I welcome any reader who wants to raise the flag of 'buy and hope', 'die and hold', etc., whatever phrase one wants to call the nonsensical strategy of 'buy and hold'. Bottom line, right at the time the baby boomers are retiring buy and hold has been exposed as perhaps the biggest Ponzi scheme ever. How much did millions pay in fees to the big mutual funds to receive no return over the last decade? Billions of wasted money. And yes, Warren Buffett deserves all of the accolades for building a successful multi-national firm, but stop pretending he got rich simply by buy and holding. That is simply flat out not true. If one is a buy and hold investor, or used to be one, they should read carefully a point of view (trend following) that has long escaped the mainstream. It is no time to keep drinking the Kool-aid. And while I appreciate you taking the time to offer a review, ignoring facts simply because you feel your hero was denigrated is transparent.
Click to expand...
 
Don't think we're done yet, guys and gals.

http://dshort.com/charts/mega-bear-2000-comparisons.html?mega-bear-2000-extended

mega-bear-2000-extended.gif
 
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