Is \'buy and hold\' easy?

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On the surface, "Buy and Hope" is deceively easy. You just buy the stocks/mutual fund and stack it under the mattress and forget about it. Keep dollar average investing, the time will work the magic and in 15-20 years when I will retire. DOW is up to 30000 and I am done and live happily thereafter.

 

Not that I am happy to play spoiler here. But let me point our something here: 1) how can you be so sure in 15-20 years, DOW will be up to 30000? (BTW, In that case, BNH will work beautifully) 2) why 15-20 years, not 50-60 years? Because that is the time you will need the money most. Obviously, that is someone’s well wish and HOPE. 3) I know, I know, you will say history, hundreds of years of them, back it up. But what if there is another 911 on US soil and global warming will flood most coastal region and make NYC and Shanghai submerge or etc. etc.

 

Let’s get to the basic: past performance is no guarantee of future. This is the cruel reality and absolutely true!!

 

And there is also one more interesting point: In theory, BNH is easy. But in the reality, BNH is MOST difficult! I repeat, MOST difficult. That is why we need the reinforcement every so often from the experts whenever we get a bull market correction.  Only one man I know can do it days in and days out and with success: Warren Buffet. But again, there is only one Warren Buffet in the world. You need to be absolutely sure your opinion of DOW 300000 in 15-20 years is a good one and adhere to it no matter what. Or you might be good luck to live in a cave and don’t know what is going on around you. But get real, we are in the information age, we are bombarded by all kinds of news 24x7 from all the channels. Chances are good that you will abandon your HOPE at precisely the market bottom.

 

You might be thinking I can bottom fish at the bottom and never sell at the bottom as a weak hand. Guess what? You are the weak hand most likely, because BY DEFINITION, bottom is formed only when most people are desperate and panic.

 

OK, you might agree with me that BNH might not be my gold ticket to retirement in this crazy bear market. But what about diversification? If I am diversified enough, I can weather this storm. Right? (to be continued…)

(BTW, I hope a-mao is still holding, because selling at this low price will damage his/her wealth. He/She posted the original piece in March 2008, a Bear Stern debacle intermediate low. That is some thousands of DOW points ago...)