Buy and Hold SP500 Not A Good Idea Afterall....

Discussion in 'Trading' started by libertad, Feb 21, 2009.

  1. 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.
     
    #21     Mar 3, 2009
  2. link?
     
    #22     Mar 3, 2009
  3. 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.
     
    #23     Mar 3, 2009
  4. 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.
     
    #24     Mar 3, 2009
  5. 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.
     
    #25     Mar 3, 2009
  6. Cutten

    Cutten

    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.
     
    #26     Mar 3, 2009
  7. mynd66

    mynd66

    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?
     
    #27     Mar 3, 2009
  8. Excuse me? 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.)
     
    #28     Mar 3, 2009
  9. 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....
     
    #29     Mar 3, 2009
  10. mokwit

    mokwit

    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.
     
    #30     Mar 3, 2009