If you include dividends those who bought in 1997 would be ahead by over 20%, which is worse than a savings account, but still gains nevertheless.
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Buy and Hold SP500 Not A Good Idea Afterall....
- Thread starter libertad
- Start date
The spooz pays a 2% dividend a year roughly. Your principle would increase about 26% after 12 years assuming you didn't take any money out and compounded yearly.
Quote from nravo:
Who looks at Buy and Hold over a 10-year period, unless you accept a good chance of losing money? Do a Monte Carlo analysis.
If you get up to 20-25 years, then maybe you have to agree that buy and hold the SPY would come out ahead -- most of the time.
My recommendation if you just want to buy and hold.
You have to, at the start, commit to 20 years to be 100% SPY. If you have less time at the start, reduce your portfolio 's SPY exposure by 5% for every year less, 75 percent if you have 15 years, for instance. You may or may not beat the market, but you reduce the risk that you will lose money, possibly a substantial amount, in absolute terms.
And if you are only interested in absolute, but bonds and cash for 20 years.
You forgot about the secret market. You do not need all the old stuff you described. You just fill the truck, and bring it home.
Quote from pathus21:
The problem is what is the average American to do? A guy who is a professional such as a Doctor or Lawyer does not have the time nor the inclination to manage his own investments. If buy and hold doesn't work, what is the best way to invest?
Contract me, and I will manage your money. I will offer you this: the first 3% loss if any is on me! In addition, I will be paid only when you make money. Good deal? You bet.
Rather than type a long explanation, I will just say this: no one, NO ONE, should ever be 100% long stocks year after year. It is just pure insanity.
History has shown that stocks have a real risk of between 75% and 95% drawdowns. Every major stock index has fallen 75% at some point. Thus if you are 100% long stocks as a "buy & hold", you are risking a 90% loss at some point. Pure insanity.
By contrast, a diversified porfolio will typically have a max drawdown of maybe 30-40% once every 50 years or so. It will still make 7-8% per annum. Most years it won't lose more than 10% even in a bear market.
Most people over 40 should not have more than 40-50% in stocks.
History has shown that stocks have a real risk of between 75% and 95% drawdowns. Every major stock index has fallen 75% at some point. Thus if you are 100% long stocks as a "buy & hold", you are risking a 90% loss at some point. Pure insanity.
By contrast, a diversified porfolio will typically have a max drawdown of maybe 30-40% once every 50 years or so. It will still make 7-8% per annum. Most years it won't lose more than 10% even in a bear market.
Most people over 40 should not have more than 40-50% in stocks.
Quote from libertad:
http://www.businessweek.com/bwdaily...s_top+news+index+-+temp_dialogue+with+readers
Unless one likes to lose 50% of their money over a 10 year period....
Mr. ¨Vanguard¨does not look so smart afterall....
How do you adjust for inflation a percentage change in two different points in time?
The article said that the dow lost 50% over a ten year period and adjusting for inflation it equals the loss accumulated over just this pass year. Maybe a dumb question but I do not understand.
From peak to trough the dow lost almost 90% from 1929-33. By 1939 the market was well up off the lows but why not calculate it as 1929 to 1949 then? What significance does 1939 have?
Excuse me? Forces you to sell high and buy low?Quote from pathus21:
I think the answer might be a portfolio of multiple asset classes that is then rebalanced yearly or bi-yearly.
I am not exactly sure who pioneered this strategy or what it is called but seems to make sense to me. It forces you to sell high and buy low.
It seems so easy. Theoretically!
The problem is you don't know what is "high" until you are already at the low. You don't know what is "low" until you are already at the high. We didn't know that Dow 14000 was the "high" in 2000. People were talking about Dow 40000. (Or crude oil to $140). We didn't know S&P was the "low" in 2002 at around 800. We thought it would decline further.
And... most of the S&P decline in 2008 happened in Sep/Oct/Nov. When you look at things on a "bi-yearly" basis, you are already done. Down by -40%. (This is, of course, only the equity class.)
mynd66....
The Standard & Poor's 500-stock index, adjusted for inflation, is now down about 50% over the past 10 years from Feb. 17, 1999 to Feb. 17, 2009
The article got some pull because not adjusted for inflation, one loses on a nominal basis....and including inflation....one loses 50%...
Vanguard exists solely because many a brave manager has had the guts to try harder than just being passive....whereas the passive act like parasites off of those who make the market what it is....
The Vanguard head is an old fart getting a little too cocky....and justs talks his parasitic book as if he has a better way....
Not withstanding the managers who charged fees for pseudo management....which would be just marginally changing the passive components....
All styles come and go....including buy and hold....
And lawyers are always chasing ambulances....
The Standard & Poor's 500-stock index, adjusted for inflation, is now down about 50% over the past 10 years from Feb. 17, 1999 to Feb. 17, 2009
The article got some pull because not adjusted for inflation, one loses on a nominal basis....and including inflation....one loses 50%...
Vanguard exists solely because many a brave manager has had the guts to try harder than just being passive....whereas the passive act like parasites off of those who make the market what it is....
The Vanguard head is an old fart getting a little too cocky....and justs talks his parasitic book as if he has a better way....
Not withstanding the managers who charged fees for pseudo management....which would be just marginally changing the passive components....
All styles come and go....including buy and hold....
And lawyers are always chasing ambulances....
Buy and hold as a mantra seemed to come in with lower commissions and thus the switch to asset under management fees rather than commissions. Teaching the consumer to buy and hold was likely a brokerage industry strategy to improve their (THEIR)bottom line as it allowed for reduction in number of salesreps for a given clkient base and freed them up to sell high value fee embedded products.