I’ve posted Entry #30 to my weekly Beyond Buy-and-Hold column at the Out of Your Rut site. It’s called What’s So Bad About Buy-and-Hold?
Juicy Excerpt: Picking indexes doesn’t free you of the need to identify strong value propositions and to refuse to put money on the table until you find one. What make the “hold” part of Buy-and-Hold work is that it takes time for strong value propositions to pay off. Guess what happens in the long term to poor value propositions? They reveal themselves as poor value propositions, just as surely as strong value propositions reveal themselves over time as strong value propositions.
Fail to limit your investing to strong value propositions and you take the magic of long-term investing and turn it against you. There’s a chance that a poor value proposition will pay off in the short-term. There’s almost no chance that it will pay off in the long term. Invest your money in a poor value proposition as a Buy-and-Holder and you lock in a loss by sticking with that choice for the long term.