Mary Holm's latest scary article

[Stranger_Danger]

Article is on Stuff, Mary says :-

The saddest part is that our reader and some other New Zealanders had presumably watched from the sidelines while the opposite happened in the late 1990s. From the WiNZ launch in August 1997 to August 2000, international shares soared and the Kiwi dollar fell, boosting WiNZ units a stunning 35 per cent a year.

When the dream run ended, some WiNZ investors committed one of the deadly sins of share investing – they baled out when the going got tough.

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I would say that one of the most basic rules of share investing is to try and bale out either just before things get tough, or at the early stages of them getting tough.

Granted, its not always easy to do. But this woman appears to be saying that if you own, say, a clothes manufacturing company in a high cost nation that was once profitable, if you've spent the last 5 years getting murdered by low cost asian importers, then stay tough, stick at it! Things can only improve.

Her entire philosophy appears to be just buy an index or two and hold forever.

If this really was the way to go, why would one need advisors, managers or seminar presenters and financial writers like Mary?

In my life, when the going gets tough, I do one of two things. I either fix it, or, if I have no idea how to fix it, I bale out.

One cannot "fix" an index fund, the underlying shares it owns, or the economies those companies operate in.

Given that, I would rate baling out as nigh on compulsory if there is evidence that such action is required.

[ratkin]

Problem is that there are many false alarms, anybody with an itchy trigger finger will be in and out of stocks every five minutes.

Last week i pulled out all my old contract notes going back fifteen years. There were hundreds of the things. I sat down and usiing historical data worked out what would have happened if i had never sold any.

I was amazed at the results, i thought i had been very clever timing my exits, i avoided losing money on little gems like ITC by using corrct exit signals etc.

However when i had finished adding them all up i found out i would of been many thousands better off if i had never sold anything. Sure i would of lost everything on a few dogs, and languished with the likes of RBD however if i had kept the likes of spectrum resources then the big winners would of more than made up for the few that went belly up.

I have come to realise that the internet has changed people idea of long term, it is so easy to buy and sell share and monitor every movement that many people are now incapable of buying and forgetting, thus letting time take its course.

The situation is not helped by brokers, software sellers, technical analysts and others who rely on people buying and selling in order to justify their existance. If we all bought and held they would all be redundant and out of buisness.

Buy and hold forever isnt as bad as it sounds, often when a takeover occurs the investor is returned handsome profits , meanwhile dividends in the cheaply bought winners end up being more than the initial cost of the stock.

But in this information age with high volatility who has he patience or stomach to buy hold and forget ?

[duncan macgregor]

Ratkin, Having a sell strategy does not mean that you flick yourself out of stocks every five min. I start with a fundamental buy, stick a stop loss on it, plus a twenty pc time line from that point. If my stop loss or time line gets triggered, then i look for the reason to convince me not to sell. If there is no reason then i am out of there. The very worst mistake is to continue to hold making excuses for the company, and averaging down.
Mary Holm is a very mediocre investor, that wont even make the market average, if you take into account fees involved in her recommendations. When i look at what some of the buy and hold investors on this forum are up to, then compare it to my system, it makes me quite content to be a TA investor. macdunk

[rmbbrave]

There is no system that has been scientifically/academically proven over long periods of time to be better than "buying and holding" and "buying the index". If there was everyone would be using it.

The fact that people have different ideas and different systems and claim that they are the best should be proof that none of them work better than B & H or Buy the Index.

It a bit like religion really - each theist reckons theirs is the only true religion and all other religions are a crock - but in fact they are all wrong.

I have tried trading and it made me money and it was a lot of fun, I have tried FA and it made me money too but it was tediously boring. Now I have given up on these systems and basically I just buy the index and that is making money as well - especially for the last month and a half.

This is why I now have the quote from Adam Smith at the bottom of each post.

[duncan macgregor]

quote:Originally posted by rmbbrave
It a bit like religion really - each theist reckons theirs is the only true religion and all other religions are a crock - but in fact they are all wrong.
I have tried trading and it made me money and it was a lot of fun, I have tried FA and it made me money too but it was tediously boring. Now I have given up on these systems and basically I just buy the index and that is making money as well - especially for the last month and a half.
This is why I now have the quote from Adam Smith at the bottom of each post.

Rmbbrave, What a self rightchous i know it all post my friend. Your first know it all statement about religeon, followed by what you think about investment strategies, with eveyone wrong other than yourself. You are completely wrong on all counts, your arrogance and one eyed outlook on investing amongst other things amazes me. I hold shares long term, i also trade when i see the opportunity, i only go to church for weddings or funerals, i would hate it if i was the only person right all the time. Incidentely my system over the years, is miles in front of your Mary Holm strategy.macdunk

[Halebop]

There is no study because researchers would need a sample size perhaps approaching 250,000 investors and 20+ (I suspect 40+) years to prove or disprove index versus pick and hold versus pick and trade. Who's going to pay for it?

A lack of study is not proof. The tobacco industry traded off a lack of studies for decades, knowing it was difficult for anyone to "scientifically prove" anything because of the huge sample size required. The fund management industry relies on this assumption to peddle products that just aren't very good but deliver low risk fee revenue. The risk reduced is theirs, not the investors'.

The only fact known about investing is that people have different ideas or systems. There is no study proving that buy and hold performs better. Those studies that purport to are typically skewed by tax considerations, ask flawed questions and do not attempt to benchmark against other methods.

You are right that it's a bit like religion. It's exactly like religion only the "book" is skewed towards buy and hold or index investing and those with "faith" have read that book. A catastrophic crash like 1929 has not been experienced by most living investors but makes a lie of the contention that buy and hold is a magic bullet. Waiting a dozen years to break even is not my idea of outperformance.

Ultimately the index only works when the index is rising. FA works when your assumptions are correct. Trading only works when your timing is correct. Nobody needs a study to prove these things at least.

[Phaedrus]

Ratkin, We have been in a Bull market for a long time now, so it should not come as a surprise for you to find that stocks you sold years ago have since risen in price. It really doesn't matter a bit if a stock goes up after you have sold it so long as you put the money into another stock of equal (or better) performance. Your problem is that your later Buy decisions were not as good as the initial ones. It also appears that you are looking at all your buys - don't forget that many of these would have been made possible only by the act of your selling something else.

You have made an interesting personal observation, but this does not mean that you have discovered a universal truth. All you have proved is that you are more skilled at stock selection than you are at market timing. A "Buy and Hold" approach may well be the best one for you, but that does NOT mean that this is so for everybody.

There is a major factor here that you didn't mention - performance relative to the general market. If your theoretical "Buy and Hold" results were above average, they are based on good buy decisions. If they failed to beat the Index, your stock-picking skills are below average. Many people do not have the time, interest, systems, knowledge or ability to achieve above average performance and so, wisely, they buy Index funds.

It seems to me that you are keen on blaming "brokers, software sellers, technical analysts and others" for your underperforming selling strategy, when the problem appears to be your own itchy trigger finger!

If you had been advocating a longterm buy/hold strategy as the best one for you, I would not have challenged that assertion - but "in this information age with high volatility" only a fool would "buy hold and [u]forget</u>". Nothing goes up for ever. [u]NOTHING</u>.

[rmbbrave]

quote:Originally posted by duncan macgregor

quote:Originally posted by rmbbrave
It a bit like religion really - each theist reckons theirs is the only true religion and all other religions are a crock - but in fact they are all wrong.
I have tried trading and it made me money and it was a lot of fun, I have tried FA and it made me money too but it was tediously boring. Now I have given up on these systems and basically I just buy the index and that is making money as well - especially for the last month and a half.
This is why I now have the quote from Adam Smith at the bottom of each post.

Rmbbrave, What a self rightchous i know it all post my friend. Your first know it all statement about religeon, followed by what you think about investment strategies, with eveyone wrong other than yourself. You are completely wrong on all counts, your arrogance and one eyed outlook on investing amongst other things amazes me. I hold shares long term, i also trade when i see the opportunity, i only go to church for weddings or funerals, i would hate it if i was the only person right all the time. Incidentely my system over the years, is miles in front of your Mary Holm strategy.macdunk

Duncan,

You've got it back to front mate.

I have accepted the fact that I am no better than anyone else at investing.

I have accepted the fact that I can't predict the future with any degree of certainty.

I have accepted the fact that luck and not cleverness that has played a huge part in my success. I am lucky that I have been buying shares mostly in the last 3 years when the NXZ50 has doubled in value from 1900 to 3800.

It is you with your so-called "system" that has convinced yourself that you are cleverer than the average "sophisticated investor".

Furthermore, if you believe the moon landings were faked, that property has gone up 10% per year since 1066 and that property will go up 10% per year for the forseeable future then you are a lot stupider than the average stupid person.

[duncan macgregor]

Rmbbrave, I take it that being a school teacher has rubbed off on you. Little Johnny must not think that he is a failure so make everyone mediocre so that he gets a twisted view of things. Some people can excell where others fail at everything, even sharetrading.
I would never be any good at painting a landscape but sure as hell I can beat the average on the sharemarket. I want a picture i buy it you want shares you pay for the monkey or close your eyes and hope like hell. macdunk

[rmbbrave]

Come on Duncan,

Wake up!

Do you really think if anyone had a system that really worked they'd be blabbing about it all over the internet, or in a book?

No, they'd keep it to themselves or tell a few very rich individuals and take their money to invest.

Because as the number of people copying your system increases it becomes more difficult for you to beat the average.

We both know Yogi's system is a crock. That's why he's selling it to others for $1000. If it really worked he would keep it a secret and rake it the money for himself.