Every time the United States goes through a recession, the pundits all race to be the first to proclaim that “Buy and Hold” is dead. I can’t watch a financial news channel or read a financial website without some mention of this proclamation. Well I’m growing tired of it, and if it were up to me, I’d prohibit anyone else from making this point for the rest of 2009.
Buy and Hold is not dead, and I’m on a mission to prove it. Buy and Hold has worked brilliantly for decades, and it will continue to do so in the future. The stock you bought in 2007 is worth less now than what you bought it for? Oh boohoo, go cry me a river…somewhere else. The economy has peaks and troughs, and we’re in the middle of one of the more serious troughs since the Great Depression.
Buy and Hold has worked wonders for Warren Buffett for years.
The pundits will claim that you can’t buy a stock in year X, leave it alone, and sell it many years later in year Y for a profit. These people cherry pick companies to make their points. They find the few companies in the US economy that have failed so miserably that you’d think they were run by the very same people who run the Social Security Administration. General Motors is a favorite, along with General Electric (which is a misnomer, as we’ll prove below).
To prove that Buy and Hold is not dead, I logged onto Yahoo! Finance and randomly selected 35 components of the S&P 500. I reviewed these companies’ 20-year returns from May 21, 1989 through May 21, 2009. I selected the following companies:
Vulcan Materials (VMC),
Applied Materials (AMAT),
General Electric (GE),
Reynolds American (RAI),
Deere & Co.
