Good points B24. One small issue I have is that you put 2000-02 in the same sentence with '07-09. Two completely different issues. I would never suiggest "buy and hold(forget)" and I have been outspoken with other FA's when I say that a 20% non US equity allocation is too little. I think that 40% may be too little, but I don't want to start a fire storm. With China adding 300 million people to their middle class in the next 10 years(conservative estimate on both numbers and timeframe), investment in said region is a no brainer, but what to invest in becomes a brainer.  And the issue I'm getting in my own practise is that people want low cost investments because that's what the public talking heads propose, and that means no-load index funds, and that means buy the market, and that means the opposite of the stock pickers market. How's that for a run-on sentence(Sister Mary Therese would beat my a-s).But, continuing the catholic metaphor and being the devils advocate, after the big bull market, buy and hold became the popular strategy and ended in the lost generation. Conversely, after a lost generation is it possible that returning to buy and hold may be successful because a return to the mean? Just raising the question.

First off, you CAN put 00-02 (-49%) in the same sentence, just like 56-57 (-21%), 61-62 (-28%), 66(-22%), 68-70 (-36%), 72-73( -48%), 80-82 (-27%), and 90(-20%).  This does not even INCLUDE the depression era meltdowns.

Again, you THINK 2007-09 was an anomoly, and ignore 2000-2002.  But look at the facts.  Simply because 2008 was the WORST does not mean that major meltdowns don't happen...and OFTEN.  If you don't consider nine 20%+ corrections in 60 years as "often", then I'm not sure what would qualify.

Would a return to buy and hold work now?  I have no idea.  The bull market ran 17 years and WAAAAAY overshot the mean to the upside.  It's possible that we underperform the mean to the downside for many years also.  And FWIW, by most metrics, we are still above historical mean (P/E, Q ratio, etc.).

Here's a simple chart that you might find interesting.

http://dshort.com/charts/SP-Composite-secular-bull-bear-markets.html?SP-Composite-secular-trends-with-regression

I keep hearing every seg 3 Jones guy say that '08 was a correction. Nonsense! The difference between '01 and '02 and '07-'09 is that there was a complete international financial meltdown with no safe harbor in the later period.  If you just add '07-'09 to the list of regular corrections you are missing a very significant difference. It's a waste of time to rehash this point. If we can't discern the momentous from the common, we shouldn't be recommendig strategies to our clients.

I have always been tactical at heart. Sometimes its hurt me on the way up. But it has helped me immensely on the way down. There is nothing that requires being intellectual in this. Its just a fact that all the crap spewed by the wires about 25 year average returns on the S&P and never a 15 year rolling period where markets were down at the end of the 15 years (used to be 10) is nonsense. Yes they may be giving us facts, but its just raw data that means nothing in the real world.

When a client is down 15% in a year, he doesnt care about 15 year returns. And he cares even less, if you had a buy and hold strategy. Bond Guy is 100% correct. Our clients pay us to keep them out of deep sh*t. And if we do what we did when we were 17 years old, find em, feel em furck em and forget em, then we are not earning our fee. Period.

One more point. All this talk about the optimum 60/40 allocation is crap too. It is stated with the benefit of hindsight. Tell me how well served your clients will be over the next 5 years owning 40% bonds. Sure, that will really dampen their volatility. Yeah, right.

I left a wire to go indie a year ago last month. After the greatest shitstorm clients ever saw in their lifetimes. And i took well over 90% of my clients with me, and 100% of my A and B clients. Trust me when i tell you, that wouldn't have happened if i was walking around with a pie chart up my arse, every time i called them.

I have always been tactical at heart. Sometimes its hurt me on the way up. But it has helped me immensely on the way down. There is nothing that requires being intellectual in this. Its just a fact that all the crap spewed by the wires about 25 year average returns on the S&P and never a 15 year rolling period where markets were down at the end of the 15 years (used to be 10) is nonsense. Yes they may be giving us facts, but its just raw data that means nothing in the real world.

When a client is down 15% in a year, he doesnt care about 15 year returns. And he cares even less, if you had a buy and hold strategy. Bond Guy is 100% correct. Our clients pay us to keep them out of deep sh*t. And if we do what we did when we were 17 years old, find em, feel em furck em and forget em, then we are not earning our fee. Period.

One more point. All this talk about the optimum 60/40 allocation is crap too. It is stated with the benefit of hindsight. Tell me how well served your clients will be over the next 5 years owning 40% bonds. Sure, that will really dampen their volatility. Yeah, right.

I left a wire to go indie a year ago last month. After the greatest shitstorm clients ever saw in their lifetimes. And i took well over 90% of my clients with me, and 100% of my A and B clients. Trust me when i tell you, that wouldn't have happened if i was walking around with a pie chart up my arse, every time i called them.

Navet, B24 and SFB bring some solid thinking to the discusion. I will add that you don't need to hedge. In 08 there were no hedges. I gave you the answer- technical analysis. It's not voodoo. It's the answer.

 And you don't have to be the be-all end -all expert. Just learn some point and figure stick charting so you can spot over bought- oversold market conditions and deteriorating trading patterns. This could be applied to C share mutual funds or a wrapped ETF program where the ETFs hit your tactical allocation requirements. Best used in descretionary accounts but it could work non descretionary as well. It's not like you'll be in a panic sell or buy situation.

Just having a way to get your clients off the tracks will put you miles ahead of any of your competition.

And lastly and again 2008 was not a unique one off situation.

BG - What do you use for Tech Analysis - do you use DWA, or just the Moving Averages, or other indicators?

[quote=navet]

We had a waterfall financial event in '08. Considering that such events happen maybe 1 year in 60 or so, is it viable to use those calculations in figuring financial strategies. Face it, some outlying event can screw up any strategy. Taking '08 out of the math, buy and hold may still be reasonable.

[/quote]

You aren't actually this stupid are you... "Well my strategy works if you don't count 2008,2002,2001,2000,1977,1974,1969 etc"...

So your argument is that from 80-99 your strategy worked...No kidding, it's called a bull market...Buy and hold always works in a bull market... but now you are either even for the last 10 years or underwater...how did that help your clients.. Buy and hold is not a strategy, it is a wish..

How about from1966-82 when the market didn't do anything.

1929-53 again flat...

1905-1923 negative...

So your argument is...

1982-1999 and 1954-65..notice how your markets don't last as long...

Buy and Hold (forget) is for brokerage firms and advisors that are too lazy to do their own research, and too trustful of the firms that keeping getting us in the sh1t.

I am not advocating buy and hold. I am discussing it. My point is that I am not willing to dismiss buy and hold due to the market meltdown in '08, which WAS a unique event and should not be considered routine under any circumstances. Warren Buffet is a buy and hold advocate and I haven't seen anyone beat his record. However, I am simply trying to focus on and clarify my position on this investment strategy and its alternatives. I don't see much difference in managing an investment in 12 different sectors,  or buying a few good mutual funds etc, which seem to be buy and hold strategies to me, with the caveat that I don't buy and hold forever. For example, I have been transferring clients out of Bond Fund of America because of it's overweighting in Fed bonds. I tell my clients that a long term hold is a period of 4-7 years. All points for discussion.

I am tired of people comparing an investing philosophy to Warren Buffet.  Yes, he's a sage, but when your investment horizon is infinite, it's pretty easy to be a buy-and-holder.  Most people cannot wait forever for their portfolios to recover from collapse.  Buffett's holdings and financial circumstances (at BRK) are much more complex than an individual in retirement.

Most people aren't billionairre's either.  Add four or five zeros to the back of our client's bottom line and buy and hold becomes much easier. 

I know you've all been waiting for my input, so here goes...

I have to disagree with those saying that 2008 was just like "2002,2001,2000,1977,1974,1969 etc"..."  It was absolutely different.  Go back and look at bond returns during those down years.  In 2008 all asset classes (except treasuries & gold) blew up.  There was no safe haven in reality for brokerage clients.  In the previous examples bonds not only kicked out their interest, but also appreciated as interest rates were slashed to stimulate growth and the perverbial flight to safety.  I can remember seeeing a Putnam, yes putnam, portfolio that showed a positive return with close to that 60/40 allocation during 2000-02.  For those brokers building portfolios based on 2007-2009, I have sympathy for your 50-60 year old clients.  At some point in the very near future the S&P rallies well past 1500. 

My definition of buy & hold, yes I said hold, not hope, is finding a comfortable allocation (maybe even 60/40 gasp!) and maintaining that allocation.  Equities run up, sell off back to the original allocation.  Equities run down, buy back up to the orgiinal allocation. 

If by that definition you think I'm an idiiot, drone, salesman, asset gatherer etc. I'm fine with that.  I will continue to buy & hold and collect my fees.  My clients will continue to live within their means and as long as they stick with me, they'll meet their individually defined goals.

Like I say, there is narrative BS, and then there are the "facts".

http://www.fpajournal.org/CurrentIssue/TableofContents/ASimpleStrategyforPortfoliosTakingWithdrawals/

I don't get much out of this article below, other than the (increasing) importance of diversification and some big swinging d*** narrative claims of the virtues of tactical, without the dropping of trow. ( Proof of the benefits of tactical, or market timing, technical, if you want to call it that.)

http://www.fpajournal.org/CurrentIssue/Supplements/2010TrendsinInvesting/TheEmergingTrendofTacticalAssetAllocation/

I remember watching a young man in the training room back in the early 80's, pitching technical analysis on the telephone. He was a believer at age 22. His conviction and determination were absolute. Unfortuntately, his divining of the charts worked against his success during that particular time period.  

With respect to Buffett, he wasn't a billionaire to start with. He started small and became a billionaire through his investments. The difficulty with emulating Buffett is that he is smarter than we are(at least in regards to finance) and we may not be able to mimic his strategy. Nevertheless, buying quality investments and holding on to them as long as they are quality investments just sounds like common sense to me. Modeling strategy in response to the '08 meltdaon seems counterintuitive.

[quote=Sportsfreakbob]

BG - What do you use for Tech Analysis - do you use DWA, or just the Moving Averages, or other indicators?

[/quote]

DWA

But again, I'm not a big stock guy, so this isn't a large component of my business. I know enough to move in and out and that get's communicated. My post here, about this, is what Navet should do, is directed to those with big equity businesses.

Let's see, how did millionaire put it, that's right, i peddle bonds. A simple business that keeps producing income for those I peddle to. If they're happy i'm happy.  No market timing, just income generation.

I use DWA but honestly if i never read another analyst report on an individual stock i will be thrilled.

I use DWA primarily with ETF's. I have 7 clients in discretionary accounts that want no part of ETF's of MF's they want stocks. At some point they will get the "my way or the highway" speech, but I'm not there yet.

I love that there are FA's making the case for Buy and Hold. It makes my value proposition so much easier to sell and prospecting so much easier

That's funny, because my new clients are mostly burned-out market timers. What a great business.

I wonder how bonds will perform relative to stocks and inflation over the NEXT ten year period?

http://publications.fidelity.com/investorsWeekly/application/loadArticle?pagename=VP1003marestocks

https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/research/article?File=IWE_InvResTwoSidedCoin

I'm sure you guys have nothing to prove, anyway. But that's how I know you're just a  blowhard, lefty. You pitch bonds to a bunch of old ladies, or whatever,  and have a little fun with the in and out on the equity side over the economic cycle. And then, like the  blowhard that you are, you attack other people for  implementing sound investment practices for different risk profile cases.

No way you're holding a CFP license, getting on here and spouting your BS to the public.

I'm sorry to say, you give me a better idea of the liberal mind. Maybe you're not as smart as you think. Or maybe you're brilliant, and you're just toying with us. But I doubt it.

I know you weren't directing that towards me, but you are very sensitive

Sorry, I'm annoyed with know-it-all liberals and self righteous blowhards. I need to conserve my energy better.