As everybody already knows, the American Stock market crashed in November of 2008. It hit bottom early in 2009 and then rebounded. As you can see from the stock chart below, the Dow Jones has nearly doubled from its lows and moved past the 11000 point level.
However if we look at this index over the last 12 years, we can see that the djia was above the 9000 level in 1998. This means that there has been only a 2000 point gain, or only a total of 22% increase during the last 12 year period.
This makes me wonder whether the strategy of buying and holding conservative American stocks is dead. We probably won’t have another 1929 stock market crash ahead of us, but is there any reason to think that we can make a reasonable rate of return by buying and holding the stocks of the dow jones industrial average?
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The Dow Jones only measures the largest companies. I think there is plenty of growth in medium and small American companies.
Actually the S&P 500 only had a 9% total return over the same time period while the NASDAQ only had a 31% total return.
I cherry picked the starting date, but I think that my point about the failure of the buy and hold strategy still stands. There are other investment strategies, but there are no sure ones. The only way to make real money is to be ahead of the herd and if the herd is buying and holding, then the economy has to grow really fast for those following that strategy to have a chance to grow their investments.
I’m not arguing against buying stocks, but finding good stocks requires more work than just buying and holding the safe ones.