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.