What do you really know about investing?

[specuvestor]

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