Buy and hold actually a bad strategy?

kilburn305 wrote: ↑ A convo I had with my mom recently got me thinking about it. I told her I'm buying the Canadian dividend etf ZDV right now. and she said "I was in a dividend etf ages ago but you told me to sell it back right away because it was too expensive, I should have held it".

So I asked her to dig into the history. turns out it was actually XDV she bought at 26 dollars in 2018. price now 22.16.

Which got me to thinking. Lots of stuff is like this. Really the only thing "buy and hold" worked on was Nasdaq and to a lesser degree, the s&p which is also just a tech fund at this point, since tech is the only thing propping it up.

Discuss.

Really depends upon the stock and ETF you purchase

I'm not sure if you'd noticed, but there is a major health crisis going on right now which may have skewed this result. Looking at a single data point with arbitrary dates during a major economic downturn is not a methodology I would use to validate a specific investing theory.

Discuss.

Cocoboy1993 wrote: ↑ Really depends upon the stock and ETF you purchase

I would argue that the etfs that are outperforming always have the usual fab 5 at the top of the list. essentially they all the same.

Gungnir wrote: ↑ I'm not sure if you'd noticed, but there is a major health crisis going on right now which may have skewed this result. Looking at a single data point with arbitrary dates during a major economic downturn is not a methodology I would use to validate a specific investing theory.

Discuss.

and in 2018 it was fed tightening. reasons why prices go down don't really matter. if it wasn't corona it would be something else. technicals divine the future, fundamentals don't matter.

kilburn305 wrote: ↑ A convo I had with my mom recently got me thinking about it. I told her I'm buying the Canadian dividend etf ZDV right now. and she said "I was in a dividend etf ages ago but you told me to sell it back right away because it was too expensive, I should have held it".

So I asked her to dig into the history. turns out it was actually XDV she bought at 26 dollars in 2018. price now 22.16.

Which got me to thinking. Lots of stuff is like this. Really the only thing "buy and hold" worked on was Nasdaq and to a lesser degree, the s&p which is also just a tech fund at this point, since tech is the only thing propping it up.

Discuss.

That's too short of a time frame. The funny thing is stocks don't go up in a linear fashion. A stock can be dead money for years and then take off in short amount of time. If something is meeting your goals and the initial thesis is intact there generally isn't a reason to sell even if the stock is down/flat. I think the question is what advantage do you have when your trading?

I'm generally pretty good at staying long but some of my biggest regrets are about my sells. To add to the discussion, I'll give my own example of things going badly when you don't hold. I bought KSU in 2018 after looking at in Fastgraphs thinking it was undervalued compared to the other Tier 1 railroads. I also was thinking it was small enough that it may get acquired. After owning it it almost immediately went down and I started to question why I bought the railroad to Mexico when Trump was in office. I ended up selling at a 15% loss 5 months later. In the end, my first instinct was right and I let emotion drive me to sell. KSU is up 89% since I sold going from 99 to 189 since Dec 2018. Private equity is also looking at acquire it. I'm still happy with how I've done but this move alone has lowered my returns by 1.5%.

Also, beyond the crisis that took XDV from 26.50 to 22.10, let's just ignore the years of compounding dividends in this analysis, lol

I note you avoid talking about the distributions she would have received which contribute to total return. Edit - @Blubbs beat me to it.

Not sure what the point you are trying to make is, other than stocks go down (thanks, tips).

kilburn305 wrote: ↑ and in 2018 it was fed tightening. reasons why prices go down don't really matter. if it wasn't corona it would be something else. technicals divine the future, fundamentals don't matter.

Technicals are typically used for "shorter" period trading, Fundamentals are reviewed for long term performance. Every market correction I have experienced IS a result of Fundamentals ("way" over valuations due to muted earnings/revenues to growth rate). I fully expect Tech to lead the markets lower due to their excessive valuations to long-term averages (20 x's P/E's vs current 35 x's PE). An ETF "price" won't necessarily reflect this without knowing the underpinnings of valuation.

By most classic definitions, "Buy & Hold" is not identified as a 2 year hold period (more like 10>20 years) and is enhanced by adding to on corrections. The "safest" way to do this is on solid Blue Chip etfs that are well diversified with a long history of dividend growth or payouts. ZDV may be ok for this purpose but it is heavily geographically & sector weighted (Canada / 36% Financials). Canadian Banks have been below average performers the last few years.

I just had a half serious, half tongue-in-cheek convo with my husband about dividend ETFs in general and ZWC - BMO Canadian High Dividend Covered Call ETF in particular:

- So this ETF currently yields 8.5% and pays covered calls premiums as return of capital, not as capital gains as if I was doing it myself! Last 3 years the distributions were roughly 50/50 eligible dividends and RoC. Say I bought 150K of it - I’ll be getting 1K+ per month, and don’t pay any taxes! As up to 6.5K of dividends are tax-free in my current low-income bracket - and RoC for Canadian Holdings only affects ACB!
- But wouldn’t you have to pay bigger capital gains taxes when you sell it?
- Yeah, but since RoC can’t bring ACB below zero, after ~25 years I’ll be really winning! And if I live to a 100+...
- ...you’d really show ‘em! Given this ETF is still around and the government didn’t change the tax rules..
- ...and it didn’t deteriorate to zero by itself But hey, it could be a viable estate planning strategy: buy Canadian dividend ETFs so you’ll get larger income and your heirs will pay less in taxes! Win-win!

Blubbs wrote: ↑ Also, beyond the crisis that took XDV from 26.50 to 22.10, let's just ignore the years of compounding dividends in this analysis, lol

dividends not even 2 dollars per share. It doesn't close the gap.

freilona wrote: ↑ I just had a half serious, half tongue-in-cheek convo with my husband about dividend ETFs in general and ZWC - BMO Canadian High Dividend Covered Call ETF in particular:

- So this ETF currently yields 8.5% and pays covered calls premiums as return of capital, not as capital gains as if I was doing it myself! Last 3 years the distributions were roughly 50/50 eligible dividends and RoC. Say I bought 150K of it - I’ll be getting 1K+ per month, and don’t pay any taxes! As up to 6.5K of dividends are tax-free in my current low-income bracket - and RoC for Canadian Holdings only affects ACB!
- But wouldn’t you have to pay bigger capital gains taxes when you sell it?
- Yeah, but since RoC can’t bring ACB below zero, after ~25 years I’ll be really winning! And if I live to a 100+...
- ...you’d really show ‘em! Given this ETF is still around and the government didn’t change the tax rules..
- ...and it didn’t deteriorate to zero by itself But hey, it could be a viable estate planning strategy: buy Canadian dividend ETFs so you’ll get larger income and your heirs will pay less in taxes! Win-win!

ROC will bring your ACB to zero. After that you will pay capital gains tax on that ROC.

kilburn305 wrote: ↑ and in 2018 it was fed tightening. reasons why prices go down don't really matter. if it wasn't corona it would be something else. technicals divine the future, fundamentals don't matter.

I am not certain what is meant by this, but buy and hold should not be evaluated over such a short timeframe, and as well I would not evaluate investing strategies during a major crisis, as results are indicative of the crisis, not the strategy.

jamzbe wrote: ↑ ROC will bring your ACB to zero. After that you will pay capital gains tax on that ROC.

Damn, another idea not fully researched - thanks!

It depends. It depends on what you are doing and how you are doing it. In general, a diversified portfolio or fund works well for buy and hold. The problem i see is people doing the same on single stocks, speculative industries or companies. I saw people do It on Marijuana index ETF HMMJ, on junior miners, on cryptominers, etc. The problem is you can't label a strategy as good/bad as it matters in what context. I think in general, a diversified fund(s) it is great, but people extend the idea to be absolute.
Similar to a situation like this
what-do-perpetual-bleeder-stocks-like-n ... #p31773438
You have to cut losses especially where certain companies aren't going anywhere.

Usually, the only investments I sell are my mistakes. The rest get added to, slowly, over time.

Stryker wrote: ↑ Usually, the only investments I sell are my mistakes. The rest get added to, slowly, over time.

When and how do you determine if it's a mistake or not?

A retired Inst PM, David Stein, has a podcast called Money For The Rest of Us. This weeks topic happens to be "No One Is Entirely a Buy and Hold Investor"

https://moneyfortherestofus.com/313-buy ... investing/

Topics covered include:

• Why individual investors should invest like family offices and university endowments in order to build and preserve wealth
• Why even buy and hold investors make portfolio changes
• What are examples of the numerous decisions individuals have to make in overseeing their investment portfolios
• How badly have value stocks underperformed growth stocks
• How our mindset should change when it comes to investing

kilburn305 wrote: ↑A convo I had with my mom recently got me thinking about it. I told her I'm buying the Canadian dividend etf ZDV right now. and she said "I was in a dividend etf ages ago but you told me to sell it back right away because it was too expensive, I should have held it".

So I asked her to dig into the history. turns out it was actually XDV she bought at 26 dollars in 2018. price now 22.16.

Which got me to thinking. Lots of stuff is like this. Really the only thing "buy and hold" worked on was Nasdaq and to a lesser degree, the s&p which is also just a tech fund at this point, since tech is the only thing propping it up.

Discuss.

Buy US tech stocks and ETFs , has provided me with handsome gains over the last few years

Depends on the company.

I sold canopy growth at around 1 something from the first day of ipo i bought it at 9 something. Now its trading at .88.

I dont regret selling it.