Chart of the day: Buy and Hold?

Remember when you used to hear pundits say “‘Buy and Hold,’ that’s the ticket to shareholder wealth?” Is that really true?

I have put this thesis to the test over a number of years and it just doesn’t hold water. Bear markets are always so extreme, they wipe out gains for decades. So, if you think a bear market is under way or on the way, buy and hold won’t work.

As evidence, I provide the chart above, which shows the rolling 10-yr. return from investing in the 30 stocks in the Dow Jones Industrial Average. This is a best case scenario that does not involve transactional costs, re-balancing costs, or mutual fund fees. As you see from the chart, buying and holding at the wrong time can do lots of damage to one’s retirement portfolio. And this chart doesn’t even include the Great Depression because my data only goes back to 1929.

Caveat Emptor