I completed a 12,000 word article titled “Buy-and-Hold Is Dangerous” in February 2019. It took me a long time to write that article. Things had gotten bad at home (my ex-wife and I separated in April 2019) and I wanted to be sure that my boy Timothy understood why his dad had made this decision to tell the truth about stock investing that had caused such pain for his family. There are a lot of pieces to the story. I felt that it was important to have all of the pieces discussed in one place so that the story hung together and there was little chance of there being misunderstandings. Of course I always intended to share the article that I was writing with Timothy in mind with other interested parties.
There were times during my six-month struggle writing the article that I came close to giving up on the project. The story reflects poorly on people who work in the investment advice field and many of these people are wealthy and powerful and well-connected people. There is a voice in the head of a person trying to tell this story that says “don’t go there.” You don’t violate a social taboo without knowing that you are violating a social taboo.
Buy-and-hold is dangerous
It was writing that article that convinced me that my understanding of what was going on was sufficiently developed that I could write a book. I had tried to write a book a number of years earlier and the project did not get off the ground. When that article was finished, I knew that the book was within my reach. I expect to complete the book in the early months of next year.
There was a turning point in the writing of the article. Usually, I like to start with a title. The title to a piece tells me where it is going to go. It sets the boundaries for what needs to be addressed. I had a hard time deciding on a title for that article. I tried writing without making a final decision. That caused problems. The fact that I didn’t have a title caused me to feel a lack of confidence in the message that I was advancing. What was it that I wanted to say? I should be able to sum it up in a few words, to offer a concise version of the story. Those words should be the title.
One day it hit me – Buy-and-Hold Is Dangerous.
I was highly reluctant to write those words at the top of the first page of the article that I was writing. What did I think was going to happen? Was I going to feel an electric shock? Social taboos are enforced in various ways. I had been punished for telling the truth about stock investing in many ways at many times. I saw my marriage destroyed. I was removed from discussion board communities that I loved. I was called all sorts of ugly names. When those things happen to a person, they stick in the person’s brain and something in that person’s brain advises him not to go there when he gives thought to telling another stock investing truth.
Everyone who considers telling the truth about stock investing experiences this! That’s why things are so messed up in this field today. If we want better investment advice and a more stable economy, we need to bury this stupid taboo re telling the truth about stock investing 30 feet in the ground, where it can do no further harm to humans and other living things.
Buy-and-Hold is dangerous! There – I said it! Once you say it the first time, it becomes easier to say it a second time and then a third time. Eventually, you think nothing of it. And saying one truth often puts you in a frame of mind to say a second truth.
When I first said that the retirement study posted at John Greaney’s web site was in error, I thought that I was only talking about safe withdrawal rates. I was still a Buy-and-Holder at that time. But being forced to defend my claim that his study lacks a valuation adjustment exposed me to all the craziness in which all Buy-and-Hold thinking is saturated. On the night when over 200 of my fellow community members endorsed the death threats that had been directed at me, I knew it was over for me and Buy-and-Hold. Telling the truth about safe withdrawal rates put me on a path where I began telling the truth about Buy-and-Hold in general.
Buy-and-Hold is bad news. Not most of it. Everything except the looney tunes idea that market timing is not needed checks out and I have incorporated all of that good stuff into the Valuation-informed Indexing Model. But the looney tunes one is really, really, really bad stuff.
There is a reason why the Buy-and-Holders are so defensive about that claim. They know. They deny to themselves that they know. They want to believe and so they deny to themselves what on some level of consciousness they know. But it is not possible for any rational being to believe that price discipline is not required when buying stocks. We all have too much experience with too many other markets in which price discipline is essential to fall for that one without turning our brains off to make it happen.
It amazes me how long it took me to say out loud that Buy-and-Hold is dangerous. All of us humans are flawed creatures.
Rob’s bio is here.
