Buy and Hold

[alevin]

http://www.businessinsider.com/barclays-the-chance-of-a-new-crisis-in-2010-is-growing-2010-1

the likelihood for an “ugly” economic outcome is 40% according to Barclays. Unlike the consensus, who is overwhelmingly bullish about 2010, Barclays sees just a 10% probability of a “good” outcome:

As the crisis remains unresolved the potential for policy mistakes grows with every day. Barclays now sees four primary risks to their 2010 outlook:

• The Fed gets it wrong and spooks the market with rate increases.
• The US Treasury gets it wrong on fiscal tightening and results in yield spike.
• Consumers get cold feet and become permanent savers.
• Foreigners lose confidence in the US and a dollar crisis ensues.

So. Given the 50/50 scenario, I may be persuaded sometime this month/quarter, to move up to half my G into something else this year, but I'm still waiting on TD DeMark indicators to tell me when.

 

[Bullitt]

A friend of mine sent me this post from some member of the Berkshire Hathaway class B shares message board at yahoo, and I had to share it with the MB. My friend was smart; he used the strength of the split to unload his shares to the true believers. Who cares about 100 years down the road? Anyway, this post is just a little something to think about.

Well, all us poor little shareholders were partying on the good news that BRK/B was split 50:1 and would become part of the S&P indices. What we didn't know was that sly ole Warren slipped poison into the punch. Three days after this thing got pummeled the news is revealed that the BRK credit rating was cut. Obviously, the rats jumped ship before the news spread. Now we hopeless shareholders are left sickened by it all. The icing on the fecal cake is Buffett revealing in an interview on Charlie Rose of all places, that he paid too much for BNI and that it would be a good holding 100 years from now. Thanks a bunch. Our loyalty is sure being rewarded.

 

[JTH]

When I think of Buy & hold I think of one question. Are these the types of returns you'd like to have after investing your money for 10 years?

View attachment 8605

 

[Bullitt]

The problem with that chart, JTH, is that it doesn't account for additional contributions. I hear you though. I hear you.

 

[Birchtree]

And a buy and hold strategy is the only sure fire money maker in a long term bull.

 

[JTH]

The problem with that chart, JTH, is that it doesn't account for additional contributions. I hear you though. I hear you.

And a buy and hold strategy is the only sure fire money maker in a long term bull.

Ok I'll throw out a different perspective.

From 2000-2009 if you bought 1 share at the beginning of each month's EOB day closing prices, your average price would be $1191.726

The closing price for 2009 was $1115.10, so that's 6.87% over 10 years with a .68% yearly average.

From the movie: The Doors (1991)
Pamela: You killed my duck!
Jim Morrison: I killed your duck? [stomps on the duck]
Jim Morrison: And I'm still killing your "bleeping" duck. There! Murder! Death! Duck! Dead! Death "bleeping" dead! There, the duck is dead!

 

[Birchtree]

JTH

You miss the point on the number of shares accumulated at the bottom of the corrections and bear markets. The share price might be the same but the amount will be larger because of more accumulated shares from dollar cost averaging.

I wonder how long you'll hold your S fund position.

 

[JTH]

JTH

You miss the point on the number of shares accumulated at the bottom of the corrections and bear markets. The share price might be the same but the amount will be larger because of more accumulated shares from dollar cost averaging.

I wonder how long you'll hold your S fund position.

Sorry friend but once again you're DCA theory doesn't add up.

Let's say you buy 10,000 worth of shares on the first trading day of every month from 2000-2009 based on End of Day prices.

Thats an investment of 1,200,000 (1.2 million) over 120 months for a total of 1038.288 S&P 500 shares.

At the end of 2009 your investment is now worth 1,157,897.54

That's a 3.5% 10-year gain with a .29% yearly average.

I didn't even subtract TSP's expenses from your 3.5% earnings.

"And I'm still killing your duck"

 

[Birchtree]

I'm a humble servant and all I can do is speak from experience. And dollar cost averaging has always been my redeemer when in buy and hold mode. You have tp practice DCAing at the most difficult times - like throwing good money away and watch it float to the bottom of the well. That's where you'll find me doing my best work at investing. I adore the sweet smell of superlative manure but I certainly don't mind stepping in a pile of bear scat once in awhile. I expect we'll take out some over head resistance next week - holding tight.

 

[JTH]

Sorry friend but once again you're DCA theory doesn't add up.

Let's say you buy 10,000 worth of shares on the first trading day of every month from 2000-2009 based on End of Day prices.

Thats an investment of 1,200,000 (1.2 million) over 120 months for a total of 1038.288 S&P 500 shares.

At the end of 2009 your investment is now worth 1,157,897.54

That's a 3.5% 10-year gain with a .29% yearly average.

I didn't even subtract TSP's expenses from your 3.5% earnings.

"And I'm still killing your duck"

Nevertheless, here's the data.

View attachment 8610

 

[Birchtree]

JTH.

In this particular instance you are correct. However, using this approach during a prolonged bull market fewer shares were purchased at much higher prices using a constant buying power. If one were to increase the buying power during those periods of bear activity the end result would look much different. Providing an investor with flexibility is the beauty of DCA. What ever fires your big Mack is fine with me. How long will you hold your S fund position now that you are making money?

 

[JTH]

JTH.

In this particular instance you are correct. However, using this approach during a prolonged bull market fewer shares were purchased at much higher prices using a constant buying power. If one were to increase the buying power during those periods of bear activity the end result would look much different. Providing an investor with flexibility is the beauty of DCA. What ever fires your big Mack is fine with me. How long will you hold your S fund position now that you are making money?

DCA by nature is buy & hold and most folks don't change their contributions based on market conditions. If you're going to change your DCAs based on market conditions, then I wouldn't call that buy & hold, I'd call it timing the market. So are you telling me you're a market timer is disguise?

 

[Boghie]

DCA by nature is buy & hold and most folks don't change their contributions based on market conditions. If you're going to change your DCAs based on market conditions, then I wouldn't call that buy & hold, I'd call it timing the market. So are you telling me you're a market timer is disguise?

JTH...

I am not an honest 'Buy and Holder' - but, am normally relatively close...

Changing – increasing contributions or changing the allocation ratios of contributions - of current contributions does not negate a 'Buy and Hold' strategy. Increasing ones contributions during a crash can be thought of as being the essence of a Buy and Holder. You are increasing the value of DCAs. Reducing your DCA at an unsustainable market top when you have other bills to pay also does preclude being a Buy and Holder. And, changing contribution ratios means very little.

I would actually position that adjusting allocations in your holdings between a small number of allocation ratios - not exceeding a limiting swing (say 10% - 20%) - is not inconsistent with Buy and Hold. You are not really timing the market if you change current asset allocations a few points. You might not be a true invest and forget, but you are also not a trader.

Buy and Hold does not mean you cannot adjust, it means that you do not believe that a person can consistently pick a top and a bottom, and thus are unwilling to make massive allocation swings to current holdings. To me, swing trading huge ratios between safety and growth is the indicator of a Market Timing approach.

 

[Bullitt]

Very true that people cannot pick a top and bottom. For example, I know many of the "top timers" got back in last week- at the same area they went to cash a month ago- missing the gains off the 'bottom of the correction'.

The whole point of timing the market is to be out during the big drawdowns without regard to trading or tax costs.

The whole point to buy and hold is to use weakness or regular contributions to build a position over many years.

I kept 20% in stocks because I'm not smart enough to call a top and have yet to find someone that can. Keeping 20% in is good enough to catch a wave if one forms from here and I'm still debating whether to go 100% cash position or not. I like the idea of keeping some in the game.

 

[JTH]

Great points everyone. I've been hearing only about 3% of folks are able to consistently beat the bull markets and half of that is by luck. However, with some simple long-term timing, you can easily beat the markets in the long run.

I've already said a straight buy & hold during 2000-2009 would yield you a 3.5% 10-year gain, if you IFT'd 10,000 on the first day of each month.

As an example, a 50/200 EMA crossover would yield a a 34.02% 10-year gain with a 3.4% yearly average. That slaughters buy & hold, and protects you during the Bear markets.

Now let's take it 1 step further using the same EMA crossover, only this time, I'll exit the markets completely during sell signals, save up the money (on the sidelines), then throw it all in on the buy signals and at the beginning of each month. I'll use the same 10,000 a month strategy I used before.

That would give you a 53% 10-year gain with a 5.3% yearly average. That's a total investment of 1.2 mil with an ending balance of 1,847,180.62 million over 10 years and I didn't even count the earnings you made while you sat in the G-Fund for 4.5 years.

 

[DrDetroit]

First post since 2010!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

[evilanne]

Glad you found something of interest to you

 

[Bullitt]

Vanguard’s investors are living up their reputations for buying and holding.

Through the extreme volatility the past fortnight, Vanguard’s S&P 500 ETF has seen net inflows on every single trading day, according to new flow data from ETF.com.

Even on Monday 9 March, when global markets fell 8%, Vanguard’s S&P 500 ETF saw net inflows.

https://www.etfstream.com/news/10722_vanguards-etf-investors-are-buying-the-dip/

 

[tsptalk]

A little concerning. I'd like to see a little more panicky action from them.

 

[Rod]

Y'all know how well I did as a buy-n-holder from 2 Nov 2009 - 23 Dec 2019. A 281% monetary return. My account balance nearly tripled. My worst year was 2018 @ -6.36%. My best year was 2013 @ 35.03%. I was 60 (C) and 40 (S) during that period.