The Old Ideas on Saving & Investing Don’t Work — Here’s What Does
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This was an ironically honest article about dishonesty. Good job on that achievement. 
You’re so right about not trusting the advice you get about stock investing. For one thing, no one can tell the future. Sure there are signs and indications of what it is most likely to do, but when it comes right down to it, no one can ever be certain until it happens.
No matter what advice you get, it’s always best to accept it with skepticism and apply it with caution.
Thanks for your kind words, Jessica.
We agree 100 percent re your point that it’s best to accept all advice with skepticism. That certainly includes anything that I have put forward.
We don’t agree entirely re your point “no one can tell the future” re investing. It is certainly so that no one can tell the future precisely. But Buy-and-Hold has been tried four times in U.S. history and it has caused a wipeout of those who followed it (as well as an economic crisis that hurt even those who did not invest) each time. There was no way to be 100 percent certain in advance that Buy-and-Hold/Get Rich Quick was going to do great damage again this last time. But I think it would be fair to say that anyone informed of the realities would at least have concluded that the odds were strong that it would.
We don’t know for certain when someone drives drunk that he is going to get killed and killed others. But we don’t encourage drunk driving all the same. My view is that we should follow the same policy with Buy-and-Hold — We should note that we can never be 100 percent sure of anything while also letting people know that this is an investing strategy with a long record of causing huge amounts of human misery. I believe that we owe our fellow investors that much.
Thanks so much for stopping by to share your thoughts. Since I am not capable of getting it right by myself, it’s a big help when people like you share with my readers a different perspective. I hope we see you around these parts again!
Rob
When exactly were the 4 times buy and hold was tried?
The four times were: (1) in the early 1900s; (2) in the late 1920s; (3) in the early 1960s; and (4) in the late 1990s.
Rob
I am pretty sure that in nearly every one of the cases you mention that rapid trading was the level of market activity – not stagnant buy and hold. So, it seems completely the opposite of what you are saying
Did you redefine buy and hold somewhere along the line to mean ‘a strategy that can be attributed to anything ‘wrong’ with market forces for the purpose of setting up a bully pulpit’ instead of what it actually means?
Buy-and-Hold is the investing “strategy” that says that there is no need to consider prices when setting your stock allocation. Ask any Buy-and-Holder how much he lowered his or her stock allocation in the late 1990s. It is not Rob Bennett who says that Buy-and-Holders stick with the same stock allocation, Sadface. Buy-and-Holders themselves acknowledge this.
Rob
You seemed to have changed the subject somewhere along the way.
The periods you specified was the complete opposite of buy-and-hold. People, in aggregate, were rapidly trading and increasing their stock allocations like crazy.
This is not buy-and-hold. Buy-and-holders were behaving the same before/during/after these crises (and profited greatly in the long run assuming they had proper asset allocations).
Your thinking just does not make much sense. How can a relatively stable and level amount of market activity (exhibited by buy-and-holders) lead to insanely unstable and volatile markets by themselves? This is a rhetorical question – they clearly cannot.
Is it safe to drive a car without brakes down the highway, Sadface?
In some crazy theoretical sense, you could say it’s okay not to have brakes. So long as there is never a need to stop, you just keep going 60 and all is well.
In the real world, there come a time when there is a need to apply the brakes.
It’s the same with stock investing. There comes a time when there is a need to apply the brakes. The idea behind Buy-and-Hold is to rip the brakes out of the car, to tell people that there is some mysterious study somewhere saying that a pure Get Rich Quick approach might work this time.
In the real world, it never works. In the real world, it is a mistake to rip the brakes out of the car. In the real world, Buy-and-Hold/Get Rich Quick always ends in a crash and an economic crisis.
It’s not worth it.
Rob
Now you are being completely confusing. First you blame the crisis on B&H and now you are saying that B&H wasn’t the cause but somehow B&H investors should have ‘applied the brakes’ while the rest of the market was going ape-poop.
This is ineffective and naive for several reasons but most importantly because the B&H investors are very profitable in the long run partially due to crisis where they pickup shares at low prices. Pigs get slaughtered.
Second, B&H investors ARE selling when the market gets frothy and the fact is that they do not have the amount of assets required to stop bubbles anyway.
You are really shooting in the dark here Rob.
I’m grateful to you for setting me straight, Sadface.
Rob
