I saw a good piece today Buy and Hold is Wishful Thinking | Joe Fahmy The Next Big Move. Worth reading to many investors. It is taking a trader's perspective attacking good ol' Buy & Hold (B&H). I am not a diehard proponent, but I think one needs to recognize the strengths in the proper 'B&H approach', rather than pointing at the obvious flaws in a 'straw man B&H' created by the active crowd attacking something that does not exist. E.g. I have never seen someone using B&H forever and never rebalancing. Another key question to the creators of the 'B&H straw man' is 'buy and hold what?' So I thought why would I not bring more clarity here and show a good case for buy and hold? Here is an example of B&H that many said stopped working. I call it "Lazy" My Portfolios - Lazy | tickerspy.com via @tickerspy $global $ETF. Actually this one shows no dividends and does no rebalancing. Here is some more of Buy & Hold examples for the long term record - Lazy Portfolios - MarketWatch - Stock Market Quotes, Business News, Financial News - Invest Simple with Lazy Portfolios – MarketWatch.com Here is how to build such portfolios - Invest Simple with Lazy Portfolios - MarketWatch - Stock Market Quotes, Business News, Financial News - Invest Simple with Lazy Portfolios - MarketWatch.com Last but not the least feature - Keep Investing Very Simple, Then Enjoy Doing What You Love! Good managers come and go, bad times come and go... Assuming humanity keeps going, consider $VT. It could be a sensible option for B&H when someone invests for ages and doesn't intend to touch an account (e.g. due to lack of skill and time to follow market). So I don't find it completely unreasonable to have at least 10% in a low cost total market index fund (like $VT or $VTI). Can you do better than 'lazy'? Sure, you can enhance returns and cut your risk. It will take some time, effort AND discipline. It is simple, but not easy! You've got to do it smart. ...Relative strength (or momentum) would be one approach. It says, price is everything, buy high, sell higher. See sample here: tickerspy.com/portfolio.php?… via @tickerspy Just a 2010-2011 example. It returned less than $SPY but with less risk! AND it has been negatively correlated to $SPY lately! Consider it as a diversifier! Another approach would be value investing - having a good margin of safety for a compelling asset. Buy low sell high. This requires even more research, patience and longer time horizon. Neither will always work as you expect, so you have to be patient and follow a systematic approach with these strategies to get a boost to your returns. You will also be rewarded by reduced risk, as the two are negatively correlated. How one could put all of this together? This is what Marathon Investor is about --> goo.gl/vE6GM
This post is made of tweets I sent today earlier.
As 2011 passed, very few would disagree, that it was a hard year for investors. Relative strength strategies were hit really hard after the market peak in Q2, as you can see from my peers' performance. S&P500 practically unchanged and with wild swings throughout the year has not really justified to be in the stock market. Events in Japan and Europe have added to the great volatility and reminded us of 2008. Guru investors like Bill Gross, John Paulson, Bruce Berkowitz, to name a few, can tell you more how difficult the year was for them.
Even so, the Marathon Investor could not have asked for a better year to start this journey with you. A bit in the black for the 8 months since inception, I may say the way to protect one's capital and position portfolio for growth has been demonstrated and I hope this monthly publication helps in your investment decisions.
2012 does not look like to be much less challenging for investors. European recession has been added to the debt crisis, huge Japanese debt, Chinese threat of hard landing, the U.S. recession not completely ruled out, elevated geopolitical changes with o lot of countries facing leadership changes, Iran/Middle East issues – this is a lineup of major risks being watched and reflected by the markets, and they are not going to disappear soon. An average investor can hide in safe assets like high quality U.S. bonds and defensive stocks (as he is, and perhaps should be doing). Having a system and a disciplined approach to investments is key to navigate these markets. Marathon Investor offers a primer on adaptive asset allocation without spending much time on analyzing the challenges of the world economy. Risk management, long-term asset class valuation and relative strength are the inputs to MI decision framework. It does not abandon the concept of strategic asset allocation (which many confuse with static!) and market efficiency, which gives a natural bias to the market (lazy) portfolio in a normal environment. MI is not seeing such however. Massive deleveraging and markets' distortion by the central banks and the governments present a different and a rare environment, so pure lazyness is not justified yet. Thanks for staying with me, and good luck in 2012!
I thought I would share some thoughts with my current and future subscribers. No market calls and resolutions (even at this time of the year), at least on my side. :-)
Current subscribers have received an e-mail update ahead of the regular issue (scheduled on January 14th), due to triggered interim transaction in MI portfolio. As customary, allocations are mostly changed on Friday end of day, the first full working week of every new month (January 13th this week is the next upcoming 'window').