Lessons From Stock Market History Pt.7: buy and hold (video)

– Posted in: Investing In Stocks

This 8-part series is about investing in stocks. The best strategy is to buy and hold. Avoid tinkering with your decisions, but rebalance every year to maintain your desired level of risk. This outstanding video series was produced by SensibleInvesting.tv. I have created a summary and transcript to help you find spots that interest you and make the best use of your time.

Summary of video: Lessons From Stock Market History Pt.7: buy and hold


SensibleInvesting.tv is an independent voice that makes important educational videos about passive investing—the best I’ve seen. This series features some of the biggest names and brightest minds in the investment world. It is presented and produced by Robin Powell and his team at SensibleInvesting.tv, and published on YouTube. It is a great honor to include it in our collection of video tutorials about “Investing in Stocks”.
Key points about investing in stocks from this video:

  • The hardest thing to do is to NOT tinker with your investment decisions.
  • Real estate has the advantage that the news doesn’t tell you that the value of your real estate is up or down.
  • Mr. Market and Mr. Value: Mr. Value does all the work. Mr. Market has all the fun. Mr. Market is out there to tempt you.
  • We frequently want to chase something that’s been hot. We sell when we should be buying, we buy when we should be selling.
  • The best advice is to buy and hold, and re-balance once a year.

Transcript of: Lessons From Stock Market History Pt.7: buy and hold


(0:05 Robin Powell, reporter)

The sixth and final lesson to learn from market history sounds very simple, but in practice it’s anything but, because once we’ve put in place an investment portfolio that accurately reflects our attitude to risk, history teaches us that the best thing is to do nothing.

(0:23 Weston Wellington)

The hardest thing to do is to sit still. One of the advantages to real estate for many investors is that it’s somewhat more difficult if you own private pieces of property that don’t trade every day to sit still, because it’s difficult and expensive to sell them. I think one of the reasons why a significant number of individual investors have had overall better experience perhaps investing in property than securities is not because property has had higher returns. Oftentimes it’s had sharply lower returns, but they’ve been forced to sit still because people don’t come on the nightly news and tell you that the value of your apartment building or your house is down 4.7% today and suggest you ought to sell it and buy it back three weeks from now when it’ll be even cheaper still.

(1:11 Charles Ellis)

Buy and hold your stock investments.

Buy and hold your stock investments. Mr. Market is out there trying to tempt you to constantly tinker with your investment decisions.

This wonderful creature that Ben Graham spoke about, Mr. Market and Mr. Value. Mr. Value does all the work, Mr. Market has all the fun. Mr. Market is out there trying to tempt you, tempt you, tempt you every day. He wants you to do something, do something, do something. He’s really good at tempting you when things are pretty positive and everybody’s excited and it looks like a winning situation to be a buyer, but that’s at the highs. He really tempts you to be a seller when everybody’s telling you it’s really terribly difficult. The future is not at all promising and you can see that everything has been going down down down with prices. Mr. Market is out there ready to trade any time you’d like and he’s going to tempt you. If you can ignore him and stay in stead with the dull plodder, Mr. Value, you’ll be much, much better off.

(2:03 Robin)

The problem is that we tend to act on our emotions, and men in particular assume that doing something is better than doing nothing. But looking back through history, investors have all to often done just the wrong thing at just the wrong time.

(2:19 Gus Sauter)

We frequently want to chase something that’s been hot. Investors want to get good returns and we presume that something that’s performing well will continue to perform well. We zig when we should be zagging, we sell when we should be buying, we buy when we should be selling.

(2:36 Robin)

Another drawback with trading too often is that it adds to the charges we pay. Over time those charges can make a massive dent in our investments.

(2:46 William Bernstein, author)

The job of a stock broker is to transfer the wealth of the client to themselves. Typically they extract in the range of 2% or 3% of their assets per year from the clients, and if you do that over a period of 20, 30, 40 years, eventually your broker winds up with more of your assets than you do.

(3:06 Robin)

When we say do nothing, actually isn’t strictly accurate because perhaps once or at most twice a year, you do need to re-balance. For example, if equities have had a particularly good run, that may have left you with a higher percentage of your portfolio in shares than you’re willing to risk, or if bonds have done well, your portfolio might be more defensive than you’d like it to be.

(3:32 Tim Hale)

I think it’s an absolutely critical part of any investor’s armory of surviving market crashes. In a way, what it is is a non-predictive sort of bubble avoidance because you’re effectively selling out of things that have done well and re-balancing back down into asset classes than then subsequently perform badly.

(3:53 Richard Wood)

People don’t realize how important it is to re-balance a portfolio. The primary reason why you re-balance is because it takes you back to the original risk profile of the portfolio, so you’re not doing it to make profit. You’re doing it to make sure that your portfolio always maintains the required level of risk that you’re prepared to take. But the byproduct of re-balancing to get your risk level back to where it should be. It actually means that you’re actually taking profit and securing that profit.

(4:25 Robin)

There you have it. The last and arguably the most important lesson our experts say investors can learn from market history. Join us in part 8 for a summary of what we’ve learned and for a lighthearted look at some of the daftest decisions investors have made over the centuries.

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Footnotes and Credits: Lessons From Stock Market History Pt.7: buy and hold

This video was produced by SensibleInvesting.tv and published on YouTube Sep 9, 2013 on their YouTube channel SensibleInvesting. Their videos are the best I’ve seen on this topic. They produce them and own the copyright. They have given me permission to embed this via YouTube license onto this educational website.

Sensibleinvesting.tv provides information and opinion on low-cost, evidence-based (passive) investing. They are based in the United Kingdom, but their lessons are universal.

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