I’ve posted Entry #45 to my weekly Beyond Buy-and-Hold column at the Out of Your Rut site. It’s called Fear of Admitting Investing Mistakes Can Lead to Bigger Investing Mistakes.
Juicy Excerpt: Buy-and-Holders don’t blame their strategy when it performs poorly. They blame the economy. They argue that stock crashes just happen randomly, that there is no correlation between the insane prices that were brought on by the massive promotion of Buy-and-Hold and the economic crisis that followed. So Buy-and-Holders feel displeased about the results they have obtained but do not accept personal fault for having caused those poor returns. It’s an emotionally less painful way to cope with things.
It’s also less honest. And less enriching in the long run. If Buy-and-Holders could accept that they caused their own financial destruction, they could become far better investors in the future than they have ever been in the past.
By blaming the economy, Buy-and-Holders diminish the pressure they would otherwise feel to consider new strategies. By sticking with discredited strategies, they cause their financial pain to increase. In the long run, they feel more emotional pain than they would have if they were more honest with themselves about the mistake they made when they bought into a strategy with such a poor historical track record.