[brownsfan019]

Originally Posted by karim0028 »

Thanks Brownie Just what i was trying to say; only coming from a previous insider... All you have to do is look at the blatant conflict of interest; if that doesn't spell it out for ya, i dont know what will...

No doubt. It's too bad the general public doesn't get it...

Broker = makes money if you make money.
Broker = makes money if you lose money.

hmmmm

[DugDug]

is this a topic about buy and hold or broker bashing?

We all know the only person who is ultimately responsible for your economic investments is you, the question is how active do you want to be or how passive.

[karim0028]

Originally Posted by DugDug »

is this a topic about buy and hold or broker bashing?

We all know the only person who is ultimately responsible for your economic investments is you, the question is how active do you want to be or how passive.

Thats the point, i say you have no choice but be active.... if you leave it to a broker or a fund, then you get what you get, they will never care about your investments as much as you do.... Just ask half the country that sat through a 50% decline and then a 50% retracement of a 50% decline....

I dont ask a realtor if now is a good time to buy and i wont ask a broker (or anyone who makes money off me if i do buy) that question...

[brownsfan019]

Originally Posted by DugDug »

is this a topic about buy and hold or broker bashing?

We all know the only person who is ultimately responsible for your economic investments is you, the question is how active do you want to be or how passive.

DD - Sorry if my rant got off track, but the key is this IMO - buy and hold is alive and well and always will be, b/c of how the brokerage business is structured currently.

Brokers, which control billions of investment dollars, preach buy and hold; which in turn keeps the buy and hold dream alive for the majority of people.

So IMO buy and hold will always be the primary strategy of investing while the brokers/funds continue to make money regardless of performance - and actually have a huge motivation to keep you in the funds at all times.

Until the brokerage system is set up to compensate based on returns, buy and hold will be alive and well. They sell buy and hold as the 'approach' and then it so happens that the 'approach' coincidentally compensates them the largest way possible.

[DugDug]

To be fair - brokers dont promote buy and hold - they promote you trading - thats how they make money.
buy it "cher-ching" - oh look its gone up - buy some more, oh your not bullish then you should sell it - "cher-ching"

And given the discount brokerage these days and the fact that we are all benefiting from it I dont see how any one can really complain - no one forces us to trade.

Its more the fund mangers who are long only that promote buy and hold.... as this is where they gain the fees, and this is where when they have terrible performance they just say how they performed in line with the market.
The reality is that for the billions of dollars they have to be buy and hold. whereas we as individuals if we do our own work dont have to be.

(cher-ching the sound of a cash register ringing)

[brownsfan019]

Originally Posted by DugDug »

To be fair - brokers dont promote buy and hold - they promote you trading - thats how they make money.
buy it "cher-ching" - oh look its gone up - buy some more, oh your not bullish then you should sell it - "cher-ching"

And given the discount brokerage these days and the fact that we are all benefiting from it I dont see how any one can really complain - no one forces us to trade.

Its more the fund mangers who are long only that promote buy and hold.... as this is where they gain the fees, and this is where when they have terrible performance they just say how they performed in line with the market.
The reality is that for the billions of dollars they have to be buy and hold. whereas we as individuals if we do our own work dont have to be.

(cher-ching the sound of a cash register ringing)

To clarify, there are 3 distinct business organizations we can talk about:

1) Full Service Brokers
2) Discount Brokers
3) Money Managers (mutual funds, annuities)

General public will use #1 or #2. If they use #1 they will often then have their money directed into #3 b/c the fees are very nice there for broker and money manager. #1 is going to steer you to 'managed money' products, such as mutual funds, wrap accounts, annuities, etc. Basically anything that charges you fees up front, while you own it and/or when you sell it. They are beautiful products for the broker - do nothing and get paid every single month.

If you use a full service broker, you will in fact be sold buy and hold b/c they want you to buy some expensive product and they want you to hold it for as long as you can deal with the ups and downs so they get paid every month. Full service brokers make next to nothing on individual stock trades. The firm provides incentives for you to direct people to products that the 'professionals' manage... and that is open for debate since the majority of funds don't beat the S&P.

Discount brokers typically provide little to no advice and they are just there to get your commissions.

[james_gsx]

I think this all depends on how what you consider "buy and hold." I think it's kind of a silly idea to buy something and expect it to go up in value forever, we all know that doesn't work.

But that doesn't mean a well diversified portfolio doesn't work. Obviously, it depends on how you diversify that portfolio. This means, US equities, International equities, US/Int'l FI, Alternative (hedge funds, private equity, etc), commodities, etc. If you would like, I could go into more detail on this and provide those who care with PDFs (it's not my stuff, don't worry).

I think one of the biggest problems with buy and hold is the risk you are exposed to in various market events (beyond 3 standard deviations). In those cases, you typically see a decades worth of gains wiped out in about a year. Also, a lot of portfolio managers are obsessed with keeping a constant allocation, and will adjust quarterly. This can be deadly, especially in markets like 2008.

I also agree with Brownsfan that most mutual funds are junk. You have to be careful since many "advisors" are looking for fee's, and will get special deals on certain bonds to rack up more fees. This is all on top of the 100bp to manage the money. You can build an efficient portfolio with ETFs and keep the expenses very low.

Edit: There has also been talk of MPT being "dead", and people moving towards "tactical asset allocation". But is this a fine line with trading?

[DugDug]

BF - every country is clearly different and I guess the stock brokers have changed recently (last ten yrs) I forget that even the banks and larger brokers are pushing people into charging you 1%+ to allow them to manage your money just so they advise you to go into a fund that charges another 1% to match an index!
(Many of the brokers I know are still old school independents who get paid per trade.)

These are separate again from the independent financial advisor's who are really incentivised to put clients into the funds as they receive a kickback - whoops I mean rebate - to put clients into certain funds. The worst of these guys will get you to roll every 3-5 years as they also get the rebate from the up front fees - if there are any. So even then you dont get any benefit from the buy and hold strategy. - double doh!
currently there is a push to ban these rebates in the UK from 2013 onward I think.

While there are definitely a lot of capable advisor's/broker/managers etc; the industry kinda does create the incentives to clip fees...... but mainly again as most people cant be bothered to do their own homework - they would rather watch TV on the weekend for 10 hours a day (not including Browns fans)...... so who is to blame.

Regards a well diversified portfolio approach -well yes that will help spread the risk (not necessarily reduce it ) but it will also ensure that you dont achieve much in the way of great returns unless your asset allocation is spot on - and I think a lot of research tries to show that asset allocation is what makes up the vast majority of good returns (??)
funny that as traders (mainly short term) here most people are specialising and not diversifying..... Buffett and Soros and most of the others will tell you the same - dont.
But again - it all depends on how much work you wish to do.

So is buy and hold dead..... it should be if you are not too lazy, you truly believe that people can outperform the market over the long term via active management and you have the risk tolerance to be proved wrong.