Validea CEO John Reese today writes for MSN’s Strategy Lab that those proclaiming the death of buy-and-hold investing are premature in their claims — very premature. Buy-and-hold has a two-century-plus track record of success, Reese says; for market-timers to claim that the approach is “dead” after one very bad year or so just doesn’t make sense — especially now, before market-timers have faced their toughest challenge. “If the riskiest part of market-timing involves missing the turnaround [because you are late jumping back in the market] — and we haven’t yet reached the turnaround — how can market-timers now be claiming some sort of victory over buy-and-holders?” Reese asks.
Reese poses three questions to those now saying that market-timing is a better option than buy-and-hold: Where were they two months ago, before the recent crash?; What is their long-term track record of timing the market — and, how can an individual investor follow their approach?; and, finally, When will they get back into the market so that they don’t miss the upturn? Reese also provides data showing that, based on their historical performance, the vast majority of market-timers probably won’t be able to provide satisfactory answers to those questions.
“Someday, years from now, maybe market-timers will be able to lay claim to such a victory,” Reese says. “But when they do, they’ll have to back it up with long-term proof — not one year’s worth of crisis-driven data. And right now, that long-term proof just isn’t there.”