Is BUY & HOLD (CW) sure to make money?
Extract:-
{Another CW (aka BUY & HOLD) Master: Bill Miller
Bill Miller wasn’t as good as Warren Buffet at conventional wisdom investment, but he was still pretty darn good. His Legg Mason Capital Management Value Fund, beat the S&P 500 Index for 16 years in a row. However with the fall of the market in 2007 things began to change. Bill saw housing-related companies falling fast - companies like Freddie Mac and Fannie Mae. He didn’t see any fundamental problems. He just saw lots of bargains, especially in a long-term growing housing market. He was a long-term value investor like Warren Buffett in some ways. He saw other stocks that had fallen and he snapped them up because this was just a down cycle in a long-term growth cycle. He knew he was doing what any smart investor should do - buy when everyone else runs away because that’s where the money is made. In CW investing that’s exactly how you make money.
This kind of CW investing produced handsome returns for his mutual funds. At its peak, his funds had over $21 billion of assets under management.
Unfortunately, housing wasn’t in a short down cycle but in a long-term bubble burst. His performance collapsed. By 2011, he had lost money in four of the last five years. Fortunately, he was saved from even worse losses by the FED’s massive money printing with quantitative easing (QE1 & QE2). Still it was too much for Mr. Miller. He left the fund in 2011. As of June 2012, total assets under management were down to $1.8 billion and $10,000 invested in 1996 was worth about $8,300. The fund had lost everything it had made in over 15 years.
When the bubbles start to pop, CW(aka Buy & Hold) is not the place to be.}
NB:
What are you thinking now?
Me, there is no real guarantee in life.
Do you think "valueinvestors" has some commons here?
MARKET WIZARDS
Final word.
There is no holy grail to trading success. The methodologies employed by the “market wizards” cover the entire spectrum from purely technical to purely fundamental—and everything in between. The length of time they typically hold a trade ranges from minutes to YEARS. (aka B & H?) Although the styles of the traders are very different, many common denominators were evident:
1) All those interviewed had a driving desire to become successful traders—in many cases, overcoming many significant obstacles to reach their gaol.
2) All reflected confidence that they could continue to win over the Long RUN. Almost invariably, they considered their own trading as the best and safest investment for their money.
3) Each trader had found a methodology that worked for him and remained true to that approach. It is significant that DISCIPLINE was the word most frequently mentioned.
4) The top traders take their trading very seriously; most devote a substantial amount of their waking hours to market analysis and trading strategy.
5) Rigid risk control is one of the key elements in the trading strategy of virtually all those interviewed.
6) In a variety of ways, many of the traders stressed the importance of having patience to wait for the right trading opportunity to present itself.
7) The importance of acting independent of the crowd was a frequently emphasized point.
8) All the top traders understand that losing is part of the game.
9) They all love what they are doing.
10) Care to add some of your view or experience?
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i think it is quite an interesting idea though it's suppose for one of the ways of investment for retiree.
Can the idea applicable to younger investors too?
(20-03-2014, 12:26 PM)Temperament Wrote: [ -> ]Is BUY & HOLD (CW) sure to make money?
Extract:-
{Another CW (aka BUY & HOLD) Master: Bill Miller
Bill Miller wasn’t as good as Warren Buffet at conventional wisdom investment, but he was still pretty darn good. His Legg Mason Capital Management Value Fund, beat the S&P 500 Index for 16 years in a row. However with the fall of the market in 2007 things began to change. Bill saw housing-related companies falling fast - companies like Freddie Mac and Fannie Mae. He didn’t see any fundamental problems. He just saw lots of bargains, especially in a long-term growing housing market. He was a long-term value investor like Warren Buffett in some ways. He saw other stocks that had fallen and he snapped them up because this was just a down cycle in a long-term growth cycle. He knew he was doing what any smart investor should do - buy when everyone else runs away because that’s where the money is made. In CW investing that’s exactly how you make money.
This kind of CW investing produced handsome returns for his mutual funds. At its peak, his funds had over $21 billion of assets under management.
Unfortunately, housing wasn’t in a short down cycle but in a long-term bubble burst. His performance collapsed. By 2011, he had lost money in four of the last five years. Fortunately, he was saved from even worse losses by the FED’s massive money printing with quantitative easing (QE1 & QE2). Still it was too much for Mr. Miller. He left the fund in 2011. As of June 2012, total assets under management were down to $1.8 billion and $10,000 invested in 1996 was worth about $8,300. The fund had lost everything it had made in over 15 years.
When the bubbles start to pop, CW(aka Buy & Hold) is not the place to be.}
NB:
What are you thinking now?
Me, there is no real guarantee in life.
Bill Miller's problem was not Buy & Hold. His problem was contrarian too early (maybe overconfidence). If he bought and hold a year later he would have done very well, which in all due respect he did it in the new fund, putting his career and legacy at risk. I respect him for sticking to his guns rather than stick to the institutional imperative and hide in his institutional cave.
Someone told me the losers of the Great Depression was not those who bought at top. It was those rich guys who bought on the way down. That's why timing to me is very important. Those who try to pick the bottoms will have smelly fingers
Value investors who buy contrarian or MOS should be mentally prepared to hold for very long time. That is the nature of the beast. Those without patience and not meticulous is unlikely to succeed in taming the beast
PS Market Wizards are very good read as it shows there are many roads to Rome. We just need to choose the one we are comfortable with
CW (Conventional Wisdom of Timing the Market ) works only because Market always bounce back. It's only a matter of when not worrying how?
So if it takes 5 to 8 years to bounce back, meanwhile what you are going to do?
Can you stay so long in the market and survive?
I have ponder some time on market bounce back always. Reasons being there is a Business in each stock. Secondly inflation.
This 2 reasons will drive stock price higher generally which is why Index is so favorable than fixed deposits or even low yield bonds.
A 3.5% long term average index return + 3.5% Dividends, you get 7% annualized. This figure is a HOLY GRAIL in my perspective. Many people will do fine with 7% returns. A Million dollar is 70K annually.
Definitely to DIY, we have to hit more than that. To achieve 8.5% to 10% is good to justify. That's 20-40% improvement. To hit 12% - 15% annualized, you need to pat your own back hard.
To tell yourself not to DIY for not meeting 25% doesn't make sense to me. To handover to Fund Manager which most cannot hit 10% consistently puzzle me. If Warren Buffet is your Manager, i agree you should let him.
(07-05-2014, 02:50 PM)corydorus Wrote: [ -> ]I have ponder some time on market bounce back always. Reasons being there is a Business in each stock. Secondly inflation.
This 2 reasons will drive stock price higher generally which is why Index is so favorable than fixed deposits or even low yield bonds.
A 3.5% long term average index return + 3.5% Dividends, you get 7% annualized. This figure is a HOLY GRAIL in my perspective. Many people will do fine with 7% returns. A Million dollar is 70K annually.
Definitely to DIY, we have to hit more than that. To achieve 8.5% to 10% is good to justify. That's 20-40% improvement. To hit 12% - 15% annualized, you need to pat your own back hard.
To tell yourself not to DIY for not meeting 25% doesn't make sense to me. To handover to Fund Manager which most cannot hit 10% consistently puzzle me. If Warren Buffet is your Manager, i agree you should let him.
A person's psyche usually will determine whether he/she is even suitable to invest in market or not in the first place. And that includes accountants, etc...
i personally know 2 accountants who do not want or "know-how" to invest in the stock markets.
Me just a half-past-sicked(six) educated, who dares to become a "Rojak Investor"--The psyche of being fiercely wanted to be independent. ( i can found myself lonely in a group but not when i am alone) may be one of the determinants.
So people like me is definitely DIY type no matter what others think.
But started to think of putting some money in STI ETF when there is opportunity. Just to ensure a less risky way of investing as i have no more HC.
(07-05-2014, 03:14 PM)Temperament Wrote: [ -> ] (07-05-2014, 02:50 PM)corydorus Wrote: [ -> ]I have ponder some time on market bounce back always. Reasons being there is a Business in each stock. Secondly inflation.
This 2 reasons will drive stock price higher generally which is why Index is so favorable than fixed deposits or even low yield bonds.
A 3.5% long term average index return + 3.5% Dividends, you get 7% annualized. This figure is a HOLY GRAIL in my perspective. Many people will do fine with 7% returns. A Million dollar is 70K annually.
Definitely to DIY, we have to hit more than that. To achieve 8.5% to 10% is good to justify. That's 20-40% improvement. To hit 12% - 15% annualized, you need to pat your own back hard.
To tell yourself not to DIY for not meeting 25% doesn't make sense to me. To handover to Fund Manager which most cannot hit 10% consistently puzzle me. If Warren Buffet is your Manager, i agree you should let him.
A person's psyche usually will determine whether he/she is even suitable to invest in market or not in the first place. And that includes accountants, etc...
i personally know 2 accountants who do not want or "know-how" to invest in the stock markets.
Me just a half-past-sicked(six) educated, who dares to become a "Rojak Investor"--The psyche of being fiercely wanted to be independent. ( i can found myself lonely in a group but not when i am alone) may be one of the determinants.
So people like me is definitely DIY type no matter what others think.
But started to think of putting some money in STI ETF when there is opportunity. Just to ensure a less risky way of investing as i have no more HC.
Temp, I couldn't agree more from your statement. I realize from the many players alike of yester-years till now. There will be alot of financial gurus and also many accountants. Problem is, they read too much into those financial figures to the extent of generating more fear into putting the decision to buy. In the end, after so many years of research, they will still go into buying safe blue chip stocks - aka very safe (SMRT). SMRT has been very safe before the maintenance regime didn't quite make the cut.
I am starting to like ETF very much now as I see a bubble forming on almost every good valuebuddy stock thus-far. Will the bubble really burst so that it lowers the risk of owning our VB - recommended stocks ?
