Submitted by Anonymous on
With regard to the individual investor, is the belief that one should "buy and hold" now extinct in the current market?
Word has spread rapidly that we're in a traders' market and that current long term (roughly 5-10 years) investments are uncertain.
One anecdotal story is how a relative of mine purchased BAC stock for her 401k in the early 90s, hoping for the stock to pay-off before retirement. Now only 2 years away from retirement, and with BAC down roughly 80% from its peak in 2007, she will most likely continue to work beyond her retirement years. Again, is the idea of "buy and hold" still appropriate?
Best,
William
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tom replied on Permalink
Buy and Hold
There are a couple recent posts that reference John Bogle's views on buy and hold:
http://www.annuitydigest.com/content/john_bogle_buy_and_hold_investing
http://www.annuitydigest.com/content/john-bogle-says-avoid-stock-market-...
I tend to agree with both of these posts. There is absolutely no case to be made (from a performance standpoint) for active trading among individual or retail investors. One could also make this same case for the vast majority of professional investors.
The reality is that the vast majority of professional investors underperform indexes. Turnover among actively managed funds is very high. The results do not really support the case for active trading of individual securities or even for tactical asset allocation.
If this is the case with professional investors who presumably have access to some sort of information not widely available (otherwise why pay them), then how is there a case to be made for trading of any type with the individual investor?
The BAC case seems to have more to do with diversification (or lack thereof) than buy and hold. IMO, it is completely inappropriate for individual investors to have any type of meaningful position in individual securities.
There does seem to be a case, however, for much less market exposure for individual investors--particularly those at or approaching retirement. Annuity products can play a key role in this potential paradigm shift.