January 31st Daily – Begin To Invest – Putting Buy and Hold to the Test

Quote of the Day



For the truly long-term investor, the results of a prolonged bear or bull market may very well prove of little consequence or may even produce surprisingly paradoxical results…. If you’re a twenty-something just beginning to save, then get down on your knees and pray for a market crash.

–William J. Bernstein, The Intelligent Asset Allocator



Today in History

  • 1606 – Guy Fawkes, convicted for his part in the Gunpowder Plot against the English Parliament and King James I, was executed. (It seems the judicial system moved just as slow then as it does now!)
  • 2006 – The Senate approved Ben Bernanke as chairman of the Federal Reserve. He would hold the position until 2014 – overseeing the nations worst economic collapse since the great depression.
  • Chart of the Day

One of our shared links for yesterday was Jason Zweig’s Intelligent Investor column this weekend in the Wall Street Journal (His weekly articles alone are worth the subscription).

In the article he talks about the best performing stock over the last 30 years and also mentions other “super stocks”, which are stocks that have generated returns of 10,000% or more over the last 30 years.


I was curious, in order to get those full returns for the “super stocks”, what would you have had to endure over the last 30 years? One might think that if you were lucky enough to buy one of these stocks 30 years ago, it would have been clear sailing…but that is not the case at all!


The chart below plots the wild rides for each one of the super stocks an investor would have had to endure.

For example, the lighter grey line is Apple’s performance from 1992 – 1997, when it declined nearly 80% or 1480 trading days.


All data comes from Yahoo Finance.






Some notable points:

  • There was not one super stock that did not have at least 1 45% decline or more at least once in the last 30 years.
  • Home Depot, the most successful S&P 500 stock in terms of performance over the last 30 years has seen 3 50%+ declines!
  • Could you imagine being an investment advisor and telling your clients to stay strong holding Apple stock for 1400+ days? Of course, very few (if any) did. As the article says:

“There are no investment professionals in the world who bought Apple 30 years ago and held it continuously ever since — except liars.”



Today’s Links

“I make no attempt to forecast the market – my efforts are devoted to finding undervalued securities.”

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