{"id":2113373,"date":"2019-09-23T13:54:49","date_gmt":"2019-09-23T08:24:49","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=2113373"},"modified":"2019-09-23T13:55:01","modified_gmt":"2019-09-23T08:25:01","slug":"the-buy-and-hold-bet","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2019\/09\/23\/the-buy-and-hold-bet\/","title":{"rendered":"The Buy and Hold Bet"},"content":{"rendered":"\n

The biggest bet that buy and hold investors of a given country are making is that their government stays committed to increase, preserve and protect their citizen’s wealth. It is a combination of regulation, property rights, human capital, investor sentiment and global capital flows.<\/p>\n\n\n\n

Buy and hold worked out great for US investors in the last 30-years. Inflation was mostly under control and they enjoyed a dollarized world with the rest of the world sending their surpluses to the US. But It wasn’t always like this. <\/p>\n\n\n\n

The year 1980 was a turning point for US bonds and equities. Not that there weren’t hiccups along the way – Black Friday, tech bust, GFC, etc – but it was the beginning of a huge tail-wind that continues to blow even today. Compare the simulation results of pre-1980 equity returns vs. what came next:<\/p>\n\n\n\n

\"\"
Pre-1980: 5% possibility of loss in a buy-and-hold portfolio<\/figcaption><\/figure>\n\n\n\n
\"\"
Post-1980: 0% possibility of loss in a buy-and-hold portfolio<\/figcaption><\/figure>\n\n\n\n

The post 1980 data-set is so skewed that when you use the entire data-set – 1964 through 2019 – for running the simulation, you end up with a 0% loss as well.<\/p>\n\n\n\n

\"\"
1964-2019: 0% possibility of loss in a buy-and-hold portfolio<\/figcaption><\/figure>\n\n\n\n

With this data-set, it is easy to conclude that a buy-the-market “passive” buy-and-hold strategy is superior to everything else. But that would be a very aggressive conclusion to draw.<\/p>\n\n\n\n

There are quite a few countries with equity returns (since 1993) in the low single digits: GREECE, CHINA<\/strong>, JORDAN, JAPAN<\/strong>, IRELAND, AUSTRIA, PAKISTAN.<\/p>\n\n\n\n

CHINA, a country that grew its GDP in double digits, was a very poor equity investment. And JAPAN was the world’s second largest economy in 1995 but their equities are a joke on twitter.<\/p>\n\n\n\n

Only DENMARK, USA and SWITZERLAND had an extremely small chance of posting negative buy-and-hold returns.<\/p>\n\n\n\n

Out of the 43 Country specific MSCI indices we analyzed, half had more than a 10% chance of giving negative returns to buy-and-hold investors. India had a 6% chance.<\/p>\n\n\n\n

\"\"
6% possibility of loss in a buy-and-hold portfolio<\/figcaption><\/figure>\n\n\n\n

Any analysis done on US stocks should be taken with a pinch of salt. The rest of the world does not work that way.<\/p>\n\n\n\n

This post expands on an earlier one<\/a> on the same topic.<\/p>\n","protected":false},"excerpt":{"rendered":"

How confident are you about your government’s commitment to increase and protect your wealth?<\/p>\n","protected":false},"author":2,"featured_media":2106273,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[960],"class_list":["post-2113373","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-returns","entry","has-excerpt"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2113373","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=2113373"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2113373\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2106273"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=2113373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=2113373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=2113373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}