I’ve added an addendum to my Google Knol entitled “Why Buy-and-Hold Investing Can Never Work” providing a link to a recent thread at the Get Rich Slowly forum discussing the arguments advanced in the Knol.
Juicy Excerpt #1: Alex Frakt, the admin of Bogleheads, called him “The most infamous troll in the history of investing forums on the internet.” His storied past goes way back to many prominent forums, including Bogleheads, Morningstar, Early retirement, and Motley Fool. Some say he was even instrumental in the creation of Bogleheads, as they split from Morningstar to seek a better refuge against trolls that went unchecked. The thing is, like any other good troll, Mr. Bennett talks a good game. Years and years of trolling will do that for a man. He’s highly informed , and can perhaps out-talk many of us here. But ultimately, like any other good trolls, he is one not because he can not be informative, but rather, because he simply refuses to see any evidence contrary to his position, in any way shape or form. Many have tried. All have failed.
Juicy Excerpt #2: When you make an absolute statement, such as “buy-and-hold investing can never work” then it is hard to take you seriously. All that one must do is provide a single instance in which the long-term strategy worked and it negates your entire argument. Now if you would like to say that buy-and-hold is inferior to other investment methods for the lay person then I would be greatly interested in your proposed alternatives. Otherwise this is just a poor troll attempt.
Juicy Excerpt #3: What is it that really works? There are alot of websites out there, what makes yours so special? Please use layman terms. For instance when I am able to invest i am looking at the drip investing plan, why are you for or against it?
Juicy Excerpt #4: He’s promoting market timing. Even though the smartest minds in the industry have clearly proven that market timing doesn’t work.
Juicy Excerpt #5: You, and everyone else on Earth, have no better than a 50% chance of guessing what the index will do. Period. End of story. No magic numbers will tell you otherwise.
Juicy Excerpt #6: But after a little more thought I gave up on this and ultimately decided to invest in a balanced fund. Why? I’m afraid that my algorithms were over-optimized for the given data. In hindsight it’s easy to say that you should sell your stocks when P/E 10 exceeds X. But if I looked at this data at a different point in time I might have decided on Y or Z instead. When I ran my algorithms over different (i.e. shorter) time periods they quite often failed to match the S&P 500 or a 60/40 mix. I simply can’t convince myself that the last 83 years will repeat themselves. Everything is the product of unique, unpredictable events (such as the 1970’s oil price shocks leading to unexpected high inflation). Anything could happen over the next 10, 20, 40 years. Why should we believe that there has not been, or will not be, a lasting change in valuation levels?
Juicy Excerpt #7: I think the OP does a huge disfavor by talking about Buy and Hold in the manner in which he does. It is much like those who really really get up in arms about Ramsey’s debt snowball. Sure, the math isn’t right, but personal finance is about much more than just mathematical numbers. We’re flawed human creatures. If Buy and Hold turns a 7% behavior gap into a 3% behavior gap, then that’s a huge step in the right direction of having our INVESTOR returns be close to our INVESTMENT returns. That’s like economists knocking Keynes or Friedman or something. Those guys got us somewhere better (our knowledge as a discipline increased greatly because of them). Sure, they have flaws, but come on.