Like crossing the equator on a ship — should buy and hold investors get some kind of recognition (or have some celebration) for crossing the line? The S&P 500 crossed 1100 in 1998 (twice), 2001 (3X!), 2002, 2004 and 2008. Look, when I drive around the same block twice, even I ask for directions! Oh, and today the S&P 500 is at 940. Ready for 9 passes in ten years?
So, “Buy and Hold” investors have passed the same intersection now 8 times in the last ten years. Ten YEARS! Essentially, if you’ve followed “buy and hold” you have not made money this decade. And don’t forget: Warren Buffet has been stockpiling mountains of cash for the better part of the last ten years. Think he’s been riding the S&P 500 merry-go-round? Buffet has a 20 to 30 year-plus time horizon. Do you?
See. we Americans examine our self-worth every month at the mailbox. And Buffet’s strategy isn’t really “buy and hold,” it’s “own the business.” We don’t have the capital to do that. But I think his letter to the NY Times last week was right.
Don’t misunderstand, we are facing one of the single BEST buying opportunities right here. But “right here” doesn’t mean “this week” — or maybe even “this month.” This “opportunity” may be here for several months.
If we learn anything from history of bad markets, the next few months will NOT be easy. There will be great opportunities, but there will also be stress. Without knowing — with certainty — that “this is the bottom” it’s imperative that all investments come with an “exit strategy.”
What this means is anything that is purchased at this point in time needs to have the exit points clearly marked, in case of trouble.