Perpetuating the Myth of “buy and hold”

“History is a chronicle of people clinging to erroneous ideas authenticated as religious or scientific truths. Max Planck (1858–1947), one of the greatest physicists of all time, observed: “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.””

I remember hearing everyone from my parents, to the neighbors, to the morons on TV saying, with a smirky shrug of the shoulders, “yeah, but you can’t time the market. Buy and hold the index and you’ll be fine.” (There’s really no “timing” of the market per se anyway, it’s “pricing the market” as far as I can see. The “time” part is incidental, but I digress…)

Not having a bona fide manner to exit positions is one way to deal with the uncertainty that goes with trading. It’s called “ignoring it” until a later date. “Buy and Hold” has become “Buy and Hope.” My guess is that if one was retiring right about now, they’d wished they’d timed the market a little…

I always prefer to look a little stupid trade after trade and be in cash, than to be really stupid and still be long names that might never come back. For example, CSCO – a great company – has never recovered from the highs of 2000. How long will it take Citi to come back?

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