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Is Buy and Hold Investing Dead?

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Is the buy and hold investment strategy dead?

I have argued no in previous posts [4]. There are many advantages for investors [5] who utilize a buy and hold approach.

A short video from Vanguard nicely summarizes my position. 

A Quick Reminder of the Buy and Hold Investment Strategy

The buy and hold investment strategy works well for most long-term investors who purchase index funds. I am not a fan of the buy and hold approach for individual company shares [6].

Also, it is reasonable buy and hold. You always need to periodically review your portfolio [7] and rebalance [8] against your target asset allocation. Buy and hold does not mean bury the investment in your back yard [9] and forget about it until retirement.

Is the Buy and Hold Investment Strategy Dead?

The Vanguard video asks the questions [10]:

I think a lot of people are saying, “Is buy and hold dead? Should you be pursuing a strategy of moving to the right segments of the market?”

According to Gus Sauter, Chief Investment Officer of Vanguard:

It’s really a question of how much confidence you have. But I wouldn’t say anything’s different in the capital markets that would lead you to that type of a strategy. It’s just a question of how confident you are in your ability to move to the right segments of the market. And today is no different from a decade ago or 20 years ago. If you had that capability 20 years ago, you probably should have been doing it. If you have the capability today, go ahead and do it.

So if you know what you are doing and can correctly identify market shifts, then go ahead and actively manage your assets. I fully agree.

But it is questionable as to whether investors – even professional money managers [11], investment analysts [12], or economists [13] – can consistently time market fluctuations.

As Mr. Sauter states in respect of investors being able to correctly time market movements:

Again, as we’ve said throughout, we’re just skeptical of our ability, and the ability of most investors, to be able to really execute that successfully.