Buy and Hold Can’t Die

March 6, 2012

- By David Merkel

There’s this mistaken idea trotting around in the popular media, which usually only shows its face in bear or sideways markets: buy-and-hold investing is dead. This is wrong in several ways:

1) The average investor is horrible at market timing.  They buy high and sell low.  The more volatile the asset subclass the more pronounced this behavior is.  I have witnessed this personally while analyzing the return differences for Bill Miller, Bruce Berkowitz, and the S&P 500 Spider.  There is a profound difference between the returns that a buy-and-hold investor receives, and that which the average investor receives.  The buy-and-hold investor almost always does better; the only exception that may exist are value investors who have learned to resist price trends, painful as that may be.

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