Hulbert: Buy and Hold Still Wins

If you’ve spent time lately trying to figure out when the four-plus-year bull market will come to an end, Mark Hulbert has a message for you: Stop kidding yourself.

“The vast majority of professional advisers who try to get in and out of the stock market at the right time end up doing worse than those who simply buy and hold through bull and bear markets alike,” Hulbert writes in his MarketWatch column. “Even those few who beat a buy-and-hold strategy during one period rarely beat it in the next one. What makes you so confident you can do better?”

Hulbert says that the 20 market-timing strategies monitored by his Hulbert Financial Digest with the best records through the 2000-02 bear market and the subsequent bull market fared no better during the 2007-09 bear than the average of dozens of other advisers he monitors, losing an average of 26%. “In fact,” he adds, “the 20 worst timers from the 2000-07 market cycle actually made money in the subsequent bear market. Their portfolios gained an average of 3.2%, while the average market timer lost 26%.”

Hulbert says that by employing simple buy-and-hold strategies with index funds, you can beat the market timers. “Consider a portfolio that, over the past two market cycles, was divided equally among U.S. stocks and bonds, international stocks and bonds, gold and a money-market fund,” he says. “Such a portfolio would have produced a 5.2% annualized return since the 2000 market top, nearly double the return of the U.S. stock market itself — and this superior return would have been produced with less than half the volatility of U.S. stocks.”