Comments on: The blindfold and the buy and hold: Why market timing should not be dismissed http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/ A narrative financial and investment column Fri, 04 Jul 2008 00:45:14 +0000 http://wordpress.org/?v=2.5.1 By: Jon http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2092 Jon Mon, 07 Apr 2008 13:56:33 +0000 http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2092 Thanks for the comments! I always appreciate it when my posts generate discussion. Regarding Warren Buffet, the main point that I was trying to make is that nearly every time market timing is attacked, some quote from Buffet is invariably brought out to defend buy & hold. It's almost as if just mentioning Buffet's name is enough of a defense! While he is undoubtedly one of the most famous and successful investors, because of the fact that he often promotes buy & hold, most people seem to think that this is the other option. Yes, we know Buffet is a proponent of buy & hold (though my quote in my post shows that he acknowledges its limitations). And yes, we know it worked for him. What a lot of people don't seem to recognize though is that buy & hold is not the only viable strategy - it's just the easiest and most popular. Thanks for the comments! I always appreciate it when my posts generate discussion.

Regarding Warren Buffet, the main point that I was trying to make is that nearly every time market timing is attacked, some quote from Buffet is invariably brought out to defend buy & hold. It’s almost as if just mentioning Buffet’s name is enough of a defense! While he is undoubtedly one of the most famous and successful investors, because of the fact that he often promotes buy & hold, most people seem to think that this is the other option.

Yes, we know Buffet is a proponent of buy & hold (though my quote in my post shows that he acknowledges its limitations). And yes, we know it worked for him. What a lot of people don’t seem to recognize though is that buy & hold is not the only viable strategy - it’s just the easiest and most popular.

]]> By: Roman http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2090 Roman Sun, 06 Apr 2008 19:10:39 +0000 http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2090 What you are saying is so true. But, i still believe you can beat the market. How is the part thats hard. I personal do not believe that we should living with living with a beta of 1. What you are saying is so true. But, i still believe you can beat the market. How is the part thats hard. I personal do not believe that we should living with living with a beta of 1.

]]> By: John burroughs http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2089 John burroughs Sun, 06 Apr 2008 17:12:16 +0000 http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2089 And one last one, found today on thefivecentnickel: “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 And one last one, found today on thefivecentnickel:

“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

]]> By: John burroughs http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2087 John burroughs Sun, 06 Apr 2008 04:46:49 +0000 http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2087 I enjoy your blog very much, and have found a lot of useful advice on it. So i commend you for this, but i have to disagree strongly with this article, especially with your incorrect portrayal of warren buffets stance on the issue. In fact, Buffet himself is a major practitioner of buy and hold (although he has bragged at times that he could buy and sell proficiently, he has made his money with buy and hold almost exclusively). A few of his quotes: Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. Stop trying to predict the direction of the stock market, the economy, interest rates, or elections. As far as you are concerned, the stock market does not exist. Ignore it. and, perhaps best: Always invest for the long term. and: Buy a business, don't rent stocks. aggregated on http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrenquotes.htm I enjoy your blog very much, and have found a lot of useful advice on it. So i commend you for this, but i have to disagree strongly with this article, especially with your incorrect portrayal of warren buffets stance on the issue. In fact, Buffet himself is a major practitioner of buy and hold (although he has bragged at times that he could buy and sell proficiently, he has made his money with buy and hold almost exclusively). A few of his quotes:

Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.

Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.

As far as you are concerned, the stock market does not exist. Ignore it.

and, perhaps best:

Always invest for the long term.

and:

Buy a business, don’t rent stocks.

aggregated on http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrenquotes.htm

]]> By: Jon http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2055 Jon Tue, 01 Apr 2008 18:06:40 +0000 http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2055 Sorry, my link to my source wasn't working correctly. But it is now, and if you check it you'll see that the study does include dividends. Just a brief glance shows that index fund gained 3.43, about matching inflation. Also, that's for 10 years, not 9, which I believe is the metric they used. Sorry, my link to my source wasn’t working correctly. But it is now, and if you check it you’ll see that the study does include dividends.

Just a brief glance shows that index fund gained 3.43, about matching inflation. Also, that’s for 10 years, not 9, which I believe is the metric they used.

]]> By: Anon http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2054 Anon Tue, 01 Apr 2008 17:07:54 +0000 http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2054 "money invested in an index fund nine years would be in nearly the exact same place today" This is false, as it excludes dividends: http://quicktake.morningstar.com/FundNet/TotalReturns.aspx?Country=USA&Symbol=VFINX “money invested in an index fund nine years would be in nearly the exact same place today”

This is false, as it excludes dividends:

http://quicktake.morningstar.com/FundNet/TotalReturns.aspx?Country=USA&Symbol=VFINX

]]> By: Carnival of Personal Finance #146 - Online Broker Tips Edition | Stock Trading To Go http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2050 Carnival of Personal Finance #146 - Online Broker Tips Edition | Stock Trading To Go Mon, 31 Mar 2008 12:53:03 +0000 http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2050 [...] Jon from The Money Mythos presents The blindfold and the buy and hold: Why market timing should not be dismissed. [...] [...] Jon from The Money Mythos presents The blindfold and the buy and hold: Why market timing should not be dismissed. [...]

]]> By: Hannah http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2036 Hannah Fri, 28 Mar 2008 21:01:14 +0000 http://www.moneymythos.com/2008/03/28/the-blindfold-and-the-buy-and-hold-why-market-timing-should-not-be-dismissed/#comment-2036 Even Warren Buffet admits he has no idea what the market is going to do. And most ordinary people just don't have access to sophisticated market analysis. And often, sophisticated market analysis is just plain wrong. "Buy and hold" doesn't mean "invest without any thought at all." Even advocates of the "buy and hold" strategy don't recommend buying stocks and blindly holding them. They most often recommend buying a mutual fund and holding it. Certainly, if you bought, say, ten specific stocks, you should re-evaluate them periodically to make sure the companies are still worth owning. And if you hold index funds, you should periodically re-evaluate and rebalance if, say, your International stock index fund has gotten to be a larger percentage of your portfolio than you expected. That's a good way to avoid busts -- if you re-balanced your portfolio in 2001 to make sure tech stocks weren't a huge portion, you could have avoided some of the effect of the bust. Even Warren Buffet admits he has no idea what the market is going to do. And most ordinary people just don’t have access to sophisticated market analysis. And often, sophisticated market analysis is just plain wrong.

“Buy and hold” doesn’t mean “invest without any thought at all.” Even advocates of the “buy and hold” strategy don’t recommend buying stocks and blindly holding them. They most often recommend buying a mutual fund and holding it. Certainly, if you bought, say, ten specific stocks, you should re-evaluate them periodically to make sure the companies are still worth owning. And if you hold index funds, you should periodically re-evaluate and rebalance if, say, your International stock index fund has gotten to be a larger percentage of your portfolio than you expected. That’s a good way to avoid busts — if you re-balanced your portfolio in 2001 to make sure tech stocks weren’t a huge portion, you could have avoided some of the effect of the bust.

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