I’ve posted Entry #93 to my weekly Investing: The New Rules column at the Death by 1,000 Papercuts site. It’s titled The Weakness of Human Nature in Investors: Three Reasons for Optimism.
Juicy Excerpt: It is my sense that The Stock-Selling Industry experienced a loss of nerve when it developed Buy-and-Hold. The industry had always pushed Get Rich Quick. That’s what brings in the bucks. But Bogle understood that the industry was going to need to sell to the millions of middle-class people who were forced into the stock market when employers abandoned defined benefit pension plans. My guess is that there was marketing research that showed that the typical middle-class investor was turned off by Get Rich Quick approaches. This is why there was a desire to mix what sells (Get Rich Quick) with what works according to the research (long-term investing). The combination was called“Buy-and-Hold.”
We are all in the process today of learning just how dangerous it is to spin the research to make it appear that it supports Get Rich Quick strategies. Norm seems to think that, as losses grow, people will hold tight to the Get RIch Quick aspects of their Buy-and-Hold strategies. I do not. I think that the next crash will increase demand for a new form of Buy-and-Hold, a form of Buy-and-Hold with the Get Rich Quick element removed, a form of Buy-and-Hold that can work in the long term.