For the those with a reading comprehension problem I'm not asking for anyone's personal numbers. Simply show the numbers that support buy and hold. You guys say it works. OK, you've got me I'll listen. Why do you believe that? What's the proof?

The reason no one has come back with the numbers, and i'll get to that American Funds piece in a minute, is because you don't have anything to support your viewpoint.

As for my numbers, the numbers that support my argument is the S&P 500 index.

And everyone of you ignored my comments about the bull market's run from 82 to to 99 and B-24's excellent detailed explaination of that market. As well, the foreboding truth that the demographic wave that drove those returns is fading and how do we deal with that? What does it mean?

The American funds piece is interesting. Sure took them long enough to come out with it. I don't have it in front of me but how has the recent downturn effected the numbers? I ask, because that piece, just like all Hypos is really just lying with statistics. Few, if any people got those returns. Those who invested outside the time frame listed, if even by a day, didn't get those returns. And more telling, is that on March 10th 2009 noone on that chart was in positive territory.  Let's see that chart, or the one for Sept 30th 2008. That said, i like American Funds and really like their Capital Income Builder Fund. But in almost 25 years of buying their funds i have yet to have a single client do as well as one of their promotional pieces.

Mily, on the gambling thing, if you don't know the difference between gambling and taking advantage of opportunity well, there isn't enough bandwidth here to explain it to you. Then again, you believe muni buyers are old ladies. But, here's a news flash for you, the people you give your client's money to, to invest, are by your definition gamblers. Look at their T/O ratios. They aren't buy and hold. They take advantage of the opportunies the markets give them. That's what you are paying them to do.

On the tech analysis thing with Bill Good. I love Bill and think he's on to something. We think alike in that investing money in these times without a way to protect against the black swan is foolish and reckless. I don't like the x's and o's but it sure beats sitting on your hands while the client book pays the price. And it's a world away from "It won't happen again." It's one answer. I've got a team member on it everyday with DWA.

[quote=BondGuy]

For the those with a reading comprehension problem...

Why do you believe that? What's the proof?

As for my numbers, the numbers that support my argument is the S&P 500 index. [/quote]

Wow, you just keep going on and on like you are the greatest thing since sliced bread. How long after October of 2007 did you wait to form this thesis referencing the S&P 500?

Let me offer some thoughts about B&H since your request for numbers can only reflect past performances anyway and everyone knows the past doesn't mean squat going forward.

Anyone can take any strategy and find a time it worked and can find a time it doesn't work. Gold right now?Oil in June 2008? The truth of the matter is B&H is only as good or bad as you make it. If you start "Buying" whatever set of diversified securities you want and "Hold" them from the time you enter the work force until you need to sell them for income in retirement it will benefit ANYONE compared to what they "typically" would do for themselves. The thing with B&H today is that everyone knows that strategy and at least uses it. Does it make it obsolete? Does it make your strategy better? Only time will tell. But one thing for sure is as bad as B&H looks right now, it is better than a savings account and CDs.

The good thing about B&H is it is easy to explain, implement and track. The bad thing about B&H is it should be a starting point. Once the client is educated and understands or trusts their advisor enough, it should benefit them to explore other possible avenues for investments. The only way to set you apart from the pack is to be an innovator not an imitator. If someone simply uses B&H in a B&Forget strategy then I feel they may be overcharging for their service. But, depending on the situation and the client’s results 30 years from now, doing nothing, if that B&H guy were to not cold call or DK them, would be worse.

If you base the quality of investment strategies to return only there will be a time when you are right and there will be a time you are wrong. In your opinion B&H is dead. In my opinion B&H is a good place to start. So be glad that advisors are selling B&H because if it were not for them and this simplistic strategy, clients would never reach our minimums.

Disclaimer: I use a boring core model surrounded by a certain amount of cash equivalents ready to take advantage of oversold markets to increase alpha while also reducing risk of the entire portfolio when needed. Sometimes it seems like the efforts and returns do not justify the endless hours but in the end I do what i love and my clients love what I do.

[quote=N.D.]

[quote=BondGuy]

For the those with a reading comprehension problem...

Why do you believe that? What's the proof?

As for my numbers, the numbers that support my argument is the S&P 500 index. [/quote]

Wow, you just keep going on and on like you are the greatest thing since sliced bread. How long after October of 2007 did you wait to form this thesis referencing the S&P 500?

Let me offer some thoughts about B&H since your request for numbers can only reflect past performances anyway and everyone knows the past doesn't mean squat going forward.

Anyone can take any strategy and find a time it worked and can find a time it doesn't work. Gold right now?Oil in June 2008? The truth of the matter is B&H is only as good or bad as you make it. If you start "Buying" whatever set of diversified securities you want and "Hold" them from the time you enter the work force until you need to sell them for income in retirement it will benefit ANYONE compared to what they "typically" would do for themselves. The thing with B&H today is that everyone knows that strategy and at least uses it. Does it make it obsolete? Does it make your strategy better? Only time will tell. But one thing for sure is as bad as B&H looks right now, it is better than a savings account and CDs.

The good thing about B&H is it is easy to explain, implement and track. The bad thing about B&H is it should be a starting point. Once the client is educated and understands or trusts their advisor enough, it should benefit them to explore other possible avenues for investments. The only way to set you apart from the pack is to be an innovator not an imitator. If someone simply uses B&H in a B&Forget strategy then I feel they may be overcharging for their service. But, depending on the situation and the client’s results 30 years from now, doing nothing, if that B&H guy were to not cold call or DK them, would be worse.

If you base the quality of investment strategies to return only there will be a time when you are right and there will be a time you are wrong. In your opinion B&H is dead. In my opinion B&H is a good place to start. So be glad that advisors are selling B&H because if it were not for them and this simplistic strategy, clients would never reach our minimums.

Disclaimer: I use a boring core model surrounded by a certain amount of cash equivalents ready to take advantage of oversold markets to increase alpha while also reducing risk of the entire portfolio when needed. Sometimes it seems like the efforts and returns do not justify the endless hours but in the end I do what i love and my clients love what I do.

[/quote]

N.D. , sounds like you are taking things written here personally.

I ask for proof, and i get attacked personally, time and time again. And still no numbers. I'm not asking for your numbers, because, likely, if you are like most advisors, myself included, you don't have audited numbers to give. You have a hodge podge of numbers from client to client based upon when they invested and just how much of your advice they took. Not a problem, and thus why i'm not asking for those numbers. You can't give them, Milly can't give them, and neither can I.

The numbers i want are the stats that back up Buy and Hold as the best strategy for our times. This time, today!

Buy and hold worked from the 82-99 time period on a very consistant basis. But it hasn't worked since. This leaves the group of people who need it most in a sad situation. For Buy and Hold to work, even in the best of times, you need time. The boomers are out of time.

My request is no different than reading someone saying that the Phillies are still the best offensive team in baseball, despite their current slump. OK, prove it? Show me the numbers that back up that statement.

It's that simple, yet a group of you have now gotten your short and curlies all twisted in a knot over it.

And so you know, my thesis, as you put it, was formed in 1987. Living through that hell was a cruel lesson.

Then there's the protection issue.

Oh, and as for being the greatest thing since sliced bread, well let's see:

I've been in the business for 27 years, thousands of clients, a mountain of money under management, a .62 ROA, a solid seven figure production range, and not one complaint, ever! Since the 08 debacle 3, count'em three clients have acated out. Meanwhile over the past two years I've added over 30 million in new assets.  My managers love me. My well paid team loves me, the charites I give my time and money to love me, or at least my money. The area's car dealers love me and most importantly my family loves me. In fact i'm meeting my sons in SC next week where we're picking up our newest toy, a 49 foot Beneteau. Then we're sailing it to my home in Florida. Actually, because of biz committments I'll only be on board for the three days to get to FL and then they'll take it the rest of the way to the west coast. Right now we're still checking bridge clearences to see if we can make it through the locks. But i digress. 

So do i think I'm the greatest thing since sliced bread? No, but looking at where I'am and considering where I started, I'm one lucky mother f#cker!  And, I know this business inside out.

Buy and hold begins with Security Analysis by Benjamin Graham and the sort of due diligence of Warren Buffet; and to that ends it begins with the same value investing that Bond Guy does. It becomes hard to leave the most brilliant minds in our industry - but in actuality following what BG says is the same thing.

His separation: take gains. Is that so different from what you do, Mily? Or anyone here?

[Edit] as a side note, the urge to "fill the boxes" when rolling investments over wipes out value investing. I can only speak for myself here and know that I am guilty of this as well. I had a rollover in April, and dutifully filled out the international box. Was that the value purchase? Guilty as charged.

If BG saw those statements, he'd have every reason to gloat. If you've bought low, it's ok to buy and hold. But buying to fill out the box, not so much.

BG - So let me get this right... It's ok for you to bash other strategies just because you have a new toy? WTF ever. I personally do not care because I know why I am here every morning FIRST and why I leave every evening LAST. And if someone starting in this business chooses to use B&H as their strategy, who are you to criticize them?

A B&H strategy from an ethical advisor is way better then the churning crap advisors that pretend to be portfolio managers. Just because they do not get paid commission doesn't mean they can't churn a client’s account. In actuality I see more churning in fee based accounts just because it gives the client the FEELING that their account is better MANAGED.

I do not see problems with strategies; I see problems with their implementation. Like I said in a previous post, B&H in some cases will be better for the client. But I stress to not let B&H become B&Forget.

All though your claims of success on this board and a dollar will only get you a McChicken sandwich, I will still offer my congratulations to your success. Many on this board speak highly of you and the respect you have earned from our peers here means far more then the words of material accomplishments you added in your second post.

I don't think that we get paid for our investment strategy. For most of us, we probably don't have a personal strategy, and even if we did it would be pure luck if we outperformed the various benchmarks. Our value to most clients is similar to that of a doctor to his patients. Most doctors are going to examine, diagnose and treat patients about the same way. In fact, they put their license at risk to do otherwise. What patients pay for is a level of expertise in medicine in general. That general understanding is beyond the pale of most patients. The doctor is knowlegable of the variety of tests and proceedures to employ a treatment plan to meet that particular patient's need. As investment advisors(or FA's etc) we build a financial plan to take careof that clients' needs to the best of our ability. Since when is beating a benchmark rellevent? What benchmark measures our ability to help the client meet his retirement, education, shorter term savings, life insurance, disability, LTC, mortgage financing, debt consolidation etc  etc  etc needs? Do clients have the capability to effectively do this for themselves?

McChicken sandwich - that was funny. 

This thread is exactly the reason there are so many ACATs floating around out there.  Every advisor does things just a little bit differently.  People, clients that is, are constantly chasing what they believe as a better mousetrap. 

Good posts.

Yeah, I was a little put off by the bragging.

Buy and hold:

http://advisorperspectives.com/newsletters10/pdfs/Asset_Allocation_Matters-But_Not_as_Much_as_You_Think.pdf

Wow , I certainly spent the last 40 minutes reading through this thing and after skipping most of mr milynair....

What I find interesting in the debate is just how we define things like bull market, bear market, flat market.

Between 1966 and 1982 we had a flat market... Right...

However if you were an advisor or investor the market was anything but flat.

66-70 (-29.3)

70-72 41.4% up

72-74 (-42.3)

74-76 73.3% up

76-78 (-24.8%)

78-82 up 32.9%

At the end of all of this who is better off? The client who bought the S&P index in 1966 or the client who used a benchmark of say 15% profit and took money off the table each time?

Serioulsy? It seems obvious to me that the real strategy is much like BG said. Take profits when they seem obvious and buy when it seems obvious. The real question is when it will seem obvious.

Dropping to 10,000 in 2008 seemed like an obvious opportunity to me at that point in time.  40% broad market drop equals a buying opportunity right?

Seriously? You're going to add value by timing the market.

You read the BS about Brinson revisited, and then at the end of the FP article:

" In other words, even if Brinson's original 90% number has been misinterpreted, this misinterpretation is still useful and holds deeper truths about what planners should be focusing on. Says Siegel, "A high-risk hedge fund may find 100% of returns come from security selection, but for most investors the key lies in finding the right asset allocation mix." "

Being a blowhard about the value you are adding, when you're not, is part of what prevents planners from being taken seriously by the public.

A few years ago, financial advisors were view more positively than they are today.

The problem is we are playing while handcuffed. When you have a financial crisis engineered by easy money and easy politics, and then you have bailouts with borrowed money, the next thing you will have is increased taxes, devaluation of the dollar and debt, and so on.

If anyone here has any real ba$$$, they will be strongly advocating more equity ownership for the long haul. Market timing is just more politics and gambling and dishonesty, which is for p*****s. Read the research.

PE 10 has been shown to have better results than simply buying and holding.

Faber has shown you can at least prevent drawdown (which is the biggest impetus for client removal from equities) by using the 200 SMA.

Just because it isn't "common thought" or hivemind mentality of the FPA, doesn't mean it doesn't work.  There has been endless propaganda on buy and hold and how no one can beat the market.  My grandpa beat the market like a son of a gun. 

A schoolteacher retired after ten years of teaching because he picked stocks out of the newspaper that he liked and sold them when he decided they were out of their rapid growth stage.

I think that the arrogance of all-knowing, this is the way it needs to be done and the only way it can be done is limiting and is not what this country was founded on.

http://www.fpajournal.org/CurrentIssue/TableofContents/ASimpleStrategyforPortfoliosTakingWithdrawals/

Magician, the study I posted earlier shows a "safe" 30 year withdrawal rate for a 60/40 portfolio to be 4.03% (1927-2008, annual 30 rolling), versus 4.37% for the "tactical" portfolio.

My point is, how much risk does the "average" advisor have to take to get how much potential increase in the withdrawal rate? Hence, the conclusion of the Brinson article above.

There has been endless propaganda on buy and hold and how no one can beat the market.  My grandpa beat the market like a son of a gun. 

A schoolteacher retired after ten years of teaching because he picked stocks out of the newspaper that he liked and sold them when he decided they were out of their rapid growth stage.

I think that the arrogance of all-knowing, this is the way it needs to be done and the only way it can be done is limiting and is not what this country was founded on.

Now we are getting to the point. Actually, no one has proved they can beat the market here. BG held up the S&P index as his acid test, which doesn't even make logical sense, since he was claiming to beat it. A non-sequitar.

I think you misrepresent your granddaddy.

What this country was not founded upon, is hiding behind BS. Having undereducated sales people call up the general public, and make big claims, and then have those big corporations legally steal money from people, and then have the government bail it out - and then try to protect the status quo, that is unAmerican.

In other words, good advisors don't sell performance, and they probably work for themselves, or small companies. They are not the blowhard wire guys who are telling performance stories and not delivering results.

If you are going to make a claim that you can beat the index, you have to prove it. So far, this entire thread, not one shred of proof, even from the journal articles. Huh.

I am not claiming to be all-knowing, I am an advocate for bringing more young people into this business, so they can help the general public, not big corporations by serving a bunch of BS or bragging about how much money they made.

Good post mily. I disagree on one point. I believe it is very American to bail out big business. Big business and government have been in bed together since Hamilton convinced congress to nationalize the revolutions war debt. Wasn't it TR who had JP Morgan bail out Wall Street after the panic of '97? I don't mean to be cynical, just give an honest appraisal of our history. In the USA the Golden Rule means the one with all the gold makes the rules. And when the guys with the gold become too corrupt, the people revolt and pressure government to act.

Thanks, Navet.

We agree. And, in a larger sense, by bringing historical perspective, maybe it calms some of the hysteria right  now on the political right. ( And the left.)

Without liquidity or stability, you just go into deep, dark recession. 

Here is a quote on the tactical question:

" To prove that active management makes sense for portfolio managers, you would need to analyze a universe of institutional managers who can own any asset class and are completely unconstrained to make asset allocation changes in pursuit of value opportunities. Then you would need to come up with an acceptable benchmark for the universe of asset classes. Since I don't believe there is such a universe of institutional managers available to study, and I don't believe investors would agree on the proper benchmark for comparison purposes, I don't believe there can be a valid study to prove or disprove the benefits of active portfolio management.

When generations of planners have been taught that active management is an unprofessional, high-risk portfolio strategy, it may be difficult for them to analyze different investment approaches objectively. Without a study to "prove" that active portfolio managers can outperform, it may be impossible to persuade the naysayers that active management is a valid choice as a money management philosophy."

http://www.financial-planning.com/fp_issues/2010_5/asset_allocation_tactics-2666636-1.html?pg=3

Most of these articles go on to say you better have some pretty solid research and methodology if you are going to try to add value.

I like selling, I'm just tired of people not trusting advisors. Most advisors will do best to focus on other than performance, and not take on market timing and certain other risks.

Also, MPT is based on research and science. Obviously, if everyone follow it, market opportunities would exist outside of what the herd was doing.

Part of my point is that the thundering herd seems to be gravitating toward market timing.

I do not agree with the author that constraints and benchmarks preclude a study to prove outperformance. You have cases where a Buffet takes actual ownership - otherwise, you have portfolios that strive to track various benchmarks in a relatively unconstrained manner. These are called managed funds, of which over the past five years 44% of large company managers have beaten their indexes.

I don't care about that. What I care about is that some advisors are trying to provide other value to clients for a fair fee, and then you have sales people mucking up the waters for the rest of us. A little more education and licensing as to who calls themself an advisor is in order.

So, if I, say, sell life insurance to business owners and do complex succession and estate planning, but do no investments, I can't call myself an advisor?  But if I throw a wrap fee around a bucket of stocks and 'manage' them for a fee, I can?