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Bogle: Buy and Hold Is Eternal

Dan Culloton

Dan: There have also been a lot of people who have said, given all the uncertainties, it doesn't make sense to adhere to a buy and hold strategy and that you have to be more strategic.

I think in one of your books you even mentioned Peter Bernstein in recent years has ascribed to this philosophy. Is buy and hold dead as a discipline, strategy, or tactic?

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Jack: Buy and hold is eternal, Dan. There is no way around it. First, think about it this way. As a group, we investors buy and hold. All of us together own the entire stock market and we hold it.

We are trading back and forth within the market with each other, and we are each trying to gain an advantage over somebody else. It is a market system that pits one investor against another. But as a group we are buy and hold investors.

If you want to be a stock-picker, pick a stock! I wouldn't do that, but pick a stock. If you are right, the person who sold it to you is wrong. I think the death knell for buy and hold is greatly, greatly overrated.

Indexing, which is the ultimate buy and hold strategy, is going to still beat the average active manager, because the average active manager owns the entire market just like the index fund does when you add all the managers together.

So buy and hold, really I think it is a buzzword; people are trying to think of something new to say. But I do think a very important point is what do you mean when you say "buy and hold"? I am a buy and holder, but that doesn't mean I buy and hold the stock market.

I buy and hold the stock market and the bond market in whatever proportions appeal to me. And for me, I don't change my allocation very much, but for me, holding roughly ... the percentage in bonds that my age is, which is getting a little bit on the old side, means I am very conservative, buying and holding approximately 80% of my assets in bonds and buying and holding approximately 20% in stocks.

That is a sensible theory. It is an explainable theory, but we don't know what people mean when they say "buy and hold."

Dan: Well Jack, thank you very much for being here today. You have been very generous with your time.

Jack: Good to be with you Dan.