CHART: The No-Brainer Strategy That'll Make You A More Successful Investor

Buy and hold.

It’s a boring, time-tested strategy that’s grossly underappreciated as investors have a propensity to fly in and out of the market.

Rich Bernstein just published a new white paper titled Is Buy-and-Hold Dead?  In it, he notes that you can cut the risk of losing money substantially just by being a little more patient.

From Bernstein’s paper:

There are sound economic reasons why extending one’s time horizon can benefit investment returns. Changes within the economy tend to be very gradual, and significant adjustments rarely happen within a short period of time. Certainly, there is plenty of daily news, but how much of that news is actually important and worth acting on? The data suggest very little of that information is meaningful and valuable. Most of it is simply noise.

Chart 1 shows the probability of losing money in the S&P 500 based on varying time horizons. As one extends one’s investment time horizon, and increasingly focuses on the fundamentals of the slow-moving economy, the probability of losing money decreases. In fact, short-term trading is like flipping a coin; it is virtually a 50/50 proposition.

rich bernstein buy hold

Photo: Richard Bernstein Advisors

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