Sunday, July 02, 2006

It's a no brainer


NY Times--July 2, 2006

Buy and Hold? Sure, but Don't Forget the 'Hold'

ASSUMING that the future is like the past, you can outperform more than 80 percent of your fellow investors over the next several decades by investing in an index fund — and doing nothing else...
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Very hard to follow a buy and hold strategy in today's impulse ridden, instant gratification oriented society.

Very telling one of our key economic indicators is consumer confidence. Very different than when I grew up in the 1940s and 1950s. Thift was highly valued then. In elementary school arithmetic class once a week we'd deposit at least a dime in a real saving account set up gratis by a local bank. The program's motto "Save your dimes and watch your dollars grow" still renonates with me.

Even brokerage firms encouraged good investing habits. When a private stationed in Germany making about $120 per month in late 1950s and early 1960s, I joined a Merrill Lynch plan for soldiers in which I purchased shares almost commission free and reinvested the dividends. Invested about $35 each month so that several months later the money had grown so substantially it financed a long leave to Paris and London.

I'm that ever so rare investor today who still follows a very long term buy and hold strategy. I also keep paper stock certificates rather than hold them in "street name". Always get a little thrill handling old Standard Oil of California stock certificates on those very rare times I need to visit the safe deposit box.

For very long term investors like myself holding top quality dividend paying securities the cash returns are extrordinary. Dividend growth alone for some of my shares returns 25% annually against the original price paid long ago.

That why if I made the White House there'll be a new set of economic indicators featuring saving and investment over consumption.

Moreover, in a Klein Administration America will never again pay retail for anything. I grew up in a world in which the bywords were "I can get it for you wholesale!"

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