Revenge of the Buy-and-Hold Nerds

Focus: MARKETS

Howard Gold Image Howard Gold Founder & President, GoldenEgg Investing

But most investors lack the nimbleness and laser focus of the superstars, so buy-and-hold investing is the only way to go with most of your money.

Besides staying the course, the other key ingredient was how you invested.

“It all depended on your equity allocation,” says Cordaro. “If you were more balanced, you’re probably back to where you were.”

In other words, “buy and hold” wasn’t the problem; what killed many Americans’ portfolios was that they were far too invested in stocks—sometimes 70% to 80% of their assets, even for retirees. That’s just crazy.

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No wonder so many people have rushed into bond funds! Although that, too, may turn out to be a bubble, the move came from investors’ legitimate concerns that they were too exposed to stocks. And Wall Street shouldn’t count on that money flooding back into the market, either.

“Most people are happy with their allocation now,” Cordaro says.

My own portfolio was a good example of that. I won’t tell you how much is in it, but here’s what it looked like in late 2007.

chart

My 50% stock position was balanced nicely by 17% bond holdings and 26% in cash—again, not because of any premonition about the market I had, but out of sheer inertia in getting the cash invested. Still, it and the bonds were valuable buffers.

 
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